Taxis to kickstart gov’t natgas car program

Good morning, friends. We’re sliding into the pre-Eid news slowdown, and we can’t say it was surprising to us after a record number of autoreplies from you folks yesterday suggested that not only Egypt, but half the investing world is off on a well-earned summer break.

We hope, wherever you are, that barbecue features prominently on your list of priorities for the week. Need some inspiration? Start with the WSJ’s BBQ: The ultimate guide or the NYT’s 6 steps to the best barbecued ribs. Want to delve deeper? Head over to the Barbecue Bible, PitmasterX or Amazing Ribs. And yeah, Reddit is a cesspool. But r/BBQ rewards the patient and those in search of community beyond the obligatory gastroporn. For verily, we are obligate carnivores.

Meanwhile: Asian shares and US equities futures are up this morning as we head into what CNBC promised us would be one of the “newsiest” weeks of the summer.

Cabinet has yet to specify what day we’re off for Eid, and both the central bank and the stock exchange have also been quiet. The expectation is that we’re all going to be off Thursday-Monday and return to work next Tuesday.

COVID-19 IN EGYPT-

Daily cases reach lowest level since 15 May: The Health Ministry yesterday confirmed 479 new cases of covid-19 — the lowest single-day total since 15 May. This brings the nation’s total confirmed cases to 92,062. The ministry also reported 48 new deaths yesterday, increasing the overall death toll to 4,606. We now have a total of 33,831 cases who have fully recovered.

Egypt is prepared for a second wave of covid-19, provided citizens continue to wear masks, practice social distancing and adhere to safety guidelines, deputy head of the state’s anti-covid task force Jihan El Assal said in an interview on Good Morning Egypt on Sunday (watch, runtime: 16:59). “There are comprehensive preparations by the health ministry for any second wave of coronavirus. If it happens, we have a plan for that,” she said.

We’d do well to listen to her advice: South Africa is now the continent’s poster child for how you can blow an early lead in the fight against covid. “Lauded in the early stages of the pandemic for taking decisive steps to limit Covid-19 infections, South Africa is now battling one of the world’s fastest-growing coronavirus outbreaks that is overpowering hospitals and has caused a dramatic increase in deaths,” writes the WSJ.

Churches in Cairo and Alexandria will reopen on 3 August, the Coptic Orthodox Church said in a recent statement. The government allowed houses of worship to partially reopen (with precautions in place) in late June, but churches decided to hold off on reopening to the public while mosques went ahead and opened their doors.

The new universal healthcare scheme is set to roll out on a trial basis in Luxor at the beginning of August, Al Shorouk reports. The program was set to be launched in Luxor and South Sinai in March, but the rollout was put on hold because of the pandemic. It is unclear whether South Sinai is also ready for the scheme’s launch. The government introduced the universal health insurance scheme on a pilot basis in Port Said in July 2019 before taking it live in September. The government plans to cover all of Egypt by 2032 over six phases.

ON THE GLOBAL FRONT-

Global confirmed coronavirus infections passed 16 mn on Sunday, according to data collected by John Hopkins University. Roughly a quarter of the cases came from the US as the country continues to see record increases in cases and deaths in several states.

European countries are reimposing quarantine measures on travelers returning from Spain as the tourism-dependent country struggles to contain a possible second wave of the virus, Bloomberg reports. The UK, France and Norway now require returning travelers to spend between 10-14 days in a quarantine facility following a recent spike in cases, especially in the Catalonia region.

Global supply chains aren’t ready to distribute mns of vials of a future vaccine, according to Bloomberg. The fragile vials will need to be transported in unprecedented quantities all around the world all while being strictly temperature controlled throughout the distribution process. Shippers are waiting for clear guidelines from pharma companies on how they need to develop their supply chains for “the biggest and most consequential product launch in modern history.” Local manufacturing operations will also need to ramp up and meet quality and safety standards, and then there’s the question of whether a given country can manufacture enough glass ampules of its own.

South Korea is providing an instruction manual for how to roll out aggressive contact tracing: Bloomberg recaps how the Asian nation, once the second hardest-hit in the world, has succeeded in curbing the spread of covid-19 using elite teams of disease experts, data specialists and lab technicians. Those so-called immediate response teams targeted hotspots where outbreaks are likely to occur, through contact tracing, pioneering a “testing blitz strategy” that significantly reduced the number of daily cases and allowed life in safe areas to go unimpeded.

GLOBAL MACRO-

The top econ story this morning in the global business press: The expiry of emergency job benefits are focusing minds on Capitol Hill and Senate Republicans are about to unveil their proposals for a third round of fiscal stimulus. What we know so far is on the table: Another round of USD 1.2k emergency checks for individuals, an extension to the ban on evictions and USD 100 mn in aid for the education system. It doesn’t look like Republicans are ready to renew the crucial USD 600 per week unemployment benefits due to end this Friday after Treasury Secretary Steve Mnuchin yesterday ruled out an extension. (Financial Times | Wall Street Journal | New York Times | Washington Post)

How can governments better position themselves for a rapid economic recovery post-covid? Build up the capacity for better financial management by relying on correct accounting for state budgets and adopt “a strong audit function,” according to a Financial Times piece penned by Hanan Salem, a director at Citi’s public sector group who was previously a top official at Egypt’s Finance Ministry. Salem and her co-author, investment adviser Dag Detter, suggest that governments that embrace accrual accounting (rather than the cash accounting method) would be vastly helpful for governments to kickstart fast growth without resorting to crippling austerity measures. This method of auditing would encourage government spending on vital infrastructure such as health and education as investments, rather than expenditures, and would also provide policymakers with a more comprehensive view of the country’s balance sheet and allow them to “derive maximum utility from their assets.”

Renewable energy is coming of age as the pandemic rumbles on: The share of renewable energy in global electricity production has reached record levels since the beginning of the pandemic, according to Reuters. Experts tell the newswire that national grids have been more resilient to the heightened energy fluctuations that come from using renewable sources, leading Europe to generate almost half of its electricity from clean energy over the past three months.

AND THE REST OF THE WORLD-

The UAE’s Dana Gas has tapped a financial advisor to advise on a USD 400 mn sukuk due in October that it has already restructured twice, according to a company statement. The company retained Houlihan Lokey “in relation to” Nile Delta Sukuk, which Dana said in April it is planning to pay down using proceeds from a planned sale of its Egypt assets. Dana asked its bondholders earlier this month to disclose their holdings, a move Reuters suggests could mean it’s looking to restructure the sukuk for the third time. Bloomberg agrees, suggesting that this indicates “the UAE energy producer may be facing difficulties repaying debt.”

Russian mercs just seized Libya’s largest oil field: Russian and Sudanese mercenaries rolled into Libya’s 300k bbl/d Sharara oil field last week, helping to secure the resources for the forces of Egypt- and UAE-backed Khalifa Haftar, the Wall Street Journal reports, citing officials from Libya’s National Oil Company.

US pleads for Gulf states to make amends over Qatar: The rift isolating Qatar from some of its Gulf neighbors has gone on long enough, and detracts from efforts to counter Iranian influence in the region, US Special Envoy for Iran Brian Hook said during a visit to the island state, Reuters reports.

Power in the global microchip business is shifting from west to east: Taiwanese semiconductor firm TSMC could be about to steal Intel’s mantle as the world’s leading chipmaker after the US giant fell fell behind yet again in the manufacturing of its next-gen chips, putting its Asian rival a generation ahead, the Financial Times reports. News of the delay sent the company’s shares down 16% on Friday, erasing USD 41bn from its market value while TSMC’s shares leapt 10%.

Intel’s failure to bring 7 nm chips into commercial production adds insult to injury as it looks ahead to losing Apple as a client. Apple last month announced that it would start phasing-in the use of its own chips in its Mac range, kicking out Intel in favor of its own Apple Silicon, which will look set to be manufactured by TSMC

Teens, get your pitchforks ready: The government could be coming for your TikTok: China hawks in the US administration are pushing to ban TikTok — currently the world’s fastest-growing social media app with more than 620 m new users this year — raising concerns about parent company ByteDance’s ties to Beijing and fearing it could be used to spread propaganda, the Financial Times reports.

Remember that thing called global warming? Well, there’s good and bad news. Scientists studying the relationship between carbon dioxide and global warming are veering away from worst case scenarios but also reducing the likelihood of the most optimistic ones, narrowing a key range for future heating to between 2.6°-3.9°C, Bloomberg reports, citing a recent study in the Reviews of Geophysics. The UN Intergovernmental Panel on Climate Change has for almost a decade used a spread between 1.5°C-4.5°C, which has influenced long term warming projections.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: We look at how international scholarship programs, which have faced a level of uncertainty because of the pandemic, could adopt adaptive measures to accelerate access for Egyptian students and offer new partnership models for scholarship support.

A supermarket cashier with a black eye topped the coverage on the airwaves last night. That’s all you need to know to gauge yesterday’s news cycle, which was devoid of anything particularly newsworthy.

Hisham Tawfik on the future of the public sector textile industry: Public Enterprises Minister Hisham Tawfik appeared on Sada El Balad last night for an interview with Azza Mostafa about planned changes to public sector weaving and textiles companies (watch, runtime: 18:14). Here are the highlights:

• Construction on mega-textile factory underway: The ministry has kicked off the project to build the world’s largest textile factory in El Mahalla El Kubra, Tawfik said. The factory is scheduled for completion within 14 months.
• Streamlining the public sector: Thirty-two spinning and weaving companies will be merged into just nine companies, the minister said. This comes as part of government efforts to reduce the bloated public sector that will see state-owned enterprises cut by as much as 25%.
• Ministry to establish new clothes factories: The ministry will set up new factories for manufacturing cotton clothes worth EGP 10 bn, which will begin production within the next two years.

Each of the talking heads were fixated on the story of an Egyptian expat cashier living in Kuwait who was assaulted on the job by a Kuwaiti. El Hadidi phoned Ambassador Hisham Asran, Egypt’s consul general in Kuwait (watch, runtime: 6:31) (watch, runtime: 4:41), while El Hekaya’s Amr Adib spoke with Immigration Minister Nabila Makram (watch, runtime: 4:29), Kuwaiti officials and the victim (watch, runtime: 4:22). Masaa DMC’s Eman El Hosary also discussed the incident with Makram (watch, runtime: 6:45).

Does construction of the Metro threaten to topple a Zamalek building? Al Kahera Alaan’s Lamees El Hadidi spoke with Transport Minister Kamel El Wazir, who discussed a statement by the National Authority for Tunnels denying reports work on the Cairo Metro was responsible for serious damage caused to a building on Zamalek’s Brazil Street and the outer wall of the Bahraini embassy. El Wazir said a team has been dispatched to assess the damage, the building has been evacuated and residents have been provided with EGP 30k to seek alternative accommodation while the problem is being resolved (watch, runtime: 16:35). El Hekaya’s Amr Adib also spoke with El Wazir to discuss the incident (watch, runtime: 14:36).

Gov’t eyes cabs to kickstart natgas car program: Taxis will be the first target of an expanded government plan to switch cars to dual-fuel engines, the local press reports, quoting unnamed government sources. President Abdel Fattah El Sisi earlier this month announced a new policy that would require car owners to convert their engines to run on natural gas, helped by low-interest finance offered by the government.

Deja vu: The “white cab replacement program,” announced in early 2009, saw the government give incentives to cabbies at the wheel of what were then some 70k black-and-whites in Cairo. Vehicle owners could pick up a locally assembled white cab on a subsidized, no-interest payment plan if they scrapped cars that had been on the road more than 20 years. There was a movement afoot by early 2011 to expand the program to civilian vehicles, but that initiative died on the vine with the events subsequent to 25 January. There’s essential background here — including on the environmental benefits — if you’re so inclined.

This time around it will be compulsory for normal taxi owners to participate. Cars used by ride-hailing companies such as Uber and Careem will be eligible for the scheme but participation will be optional, the sources said. Unlike the old program, which was open-ended, the current incarnation will take three years to complete, the sources said.

In detail: The Sisi administration has for years been offering incentives for car owners to switch to dual-fuel engines that run on both gasoline and natural gas. The latest program allows people with cars over 20 years old to obtain low-interest car loans for new vehicles, turning in their existing vehicle as a deposit, and owners of cars that are less than 20 years’ old zero-interest loans to do the same. The Oil Ministry said shortly after it plans to convert some 50k cars to run on gas during the current fiscal year, adding that plans for the year include setting up 50 new filling stations across the country. According to President Abdel Fattah El Sisi, the cost of converting 1 mn vehicles to dual-fuel engines hovers around EGP 8 bn.

*** Stay tuned for this week’s edition of Hardhat which looks at how obstacles facing the program can be overcome. We took a deeper dive into the plan in last week’s edition of our infrastructure vertical.

Sodic boss expects real estate to stage recovery starting 2H2020: Property sales could start bouncing back throughout the second half of this year after the government relaxed covid-19 measures and amid the ongoing gradual return to “normal life,” our friend Sodic CEO Magued Sherif told Al Mal and Hapi Journal in separate interviews. Expectations are that activity in the market will fully return to pre-covid levels during 1Q2021 or sometime in 2Q2021 in a more conservative outlook, says Sherif. The upmarket real estate developer is currently revising its 2020 sales target, which it expects to fall short of a previously forecast EGP 8.4 bn. Sodic’s board is due to start discussing within two weeks several scenarios for the pandemic-induced slowdown, Sherif adds.

Sodic is on the lookout for expansion prospects as the future looks clearer, says Sherif, noting that “we have reached a [higher] level of reassurance” when it comes to the pandemic. The company had previously earmarked EGP 3.7 bn in investments this year, split between construction work and prospects in the North Coast, Sheikh Zayed, and close to the new administrative capital. This figure will likely be revised downward as all construction work in Egypt was suspended for two consecutive weeks earlier during the pandemic, says Sherif.

The company is still building up its land bank and is eyeing new land acquisitions in the coming period, backed by a strong financial position, Sherif says, noting Sodic had some EGP 3.85 bn cash in hand by the end of 1Q2020. Debt is also an option for Sodic to finance the purchases, particularly as the company has a “distinguished relationship with banks” and is currently studying several other financing options including receipt factoring, he says

Sahel plans underway: Sodic recently held meetings with officials from the New Urban Communities Authority (NUCA) to launch a new phase in its planned Malaaz project in the western strip of the North Coast, he says. The chief executive hailed the recent transfer of land ownership in the area to the centralized, more experienced NUCA from local municipalities. Sherif, however, believes the Housing Ministry should double to six months a grace period it provides to construction firms to help builders and developers cope.

Other highlights:

• Sodic is in talks with AAIB for a EGP 2.5 bn loan to finance construction at Villette, and expects an agreement within three months;
• The company has invested nearly EGP 1.3 bn in EDNC, its first non-residential complex, due for delivery in November 2021;
• Its recently-launched online platform kept sales afloat amid the pandemic, helping the company retain its large expat and foreign customer base, which purchase 18% of its properties;
• The company is interested in building in the new capital, but is yet to commit to a formal plan.

Tourism begins to rebound in July: Egypt has received some 22k tourists to the coastal governorates of the Red Sea, South Sinai and Matrouh since it resumed international flights at the beginning of the month, Tourism and Antiquities Minister Khaled El Anany said in an interview with CNBC Arabia. No covid-19 cases have been reported among them. Historical and cultural tourism in Luxor and Aswan governorates will resume when covid-19 cases there subside, he said.

Don’t mention FDI: While the ministry is helping investors complete projects that were already in development pre-covid, it’s just too early to talk of new investment in the sector at this stage, El Anany said.

M&A WATCH- Media Production City acquires 64.7% stake in Arab Hotel Company from Arab Contractors subsidiaries: Six Arab Contractors subsidiaries sold a combined 64.7% stake in the Arab Hotel Company — which owns the Movenpick Hotel at the Egyptian Media Production City (EMPC) — to EMPC in a EGP 138 mn transaction, Al Shorouk reports, citing unnamed sources. The sale, which closed on 15 July, saw EMPC purchase 1,207,000 shares for EGP 115 apiece. EMPC said in June 2019 it was eyeing a 55% stake in the company, and in December purchased the National Bank of Egypt’s 17.4% stake in the company for EGP 115 per share.

STARTUP WATCH- Drowzy raises six-figure USD investment: Furniture and homeware startup Drowzy has secured an undisclosed six-figure USD investment from an unnamed “strategic angel investor” based in the UAE, MenaBytes reports. The Cairo-based company will use the money to expand its product range and grow its workforce, co-founder Mohamed Lotfy said.

About the firm: Drowzy partners with SME furniture manufacturers to construct furniture designed by its in-house team to be sold on its website. The company currently has a range of almost 100 products and around 300 SKUs on its platform.

Market regulator looks to provide “life table” for Egyptian insurance companies to better price domestic plans: The Financial Regulatory Authority (FRA) has tapped UK-based consultancy and actuarial services firm Barnett-Waddingham to develop actuarial life tables based on Egyptian data for local insurance players, according to Hapi Journal.

What exactly is a life table? Life tables (also known as mortality tables or actuarial tables) are based on statistics to calculate the probable life expectancy for people at different ages and the probability of them making it to their next birthday. The tables “assist insurance companies by showing event probabilities, such as death, sickness, and disability,” which helps insurance companies to better price their products and account for probable future life events to insure.

The FRA plans to regularly update these life tables every 3-5 years, FRA boss Mohamed Omran said. Egyptian companies currently rely on British life tables that are based on data from the 1950s, according to the newspaper, so this will be the first life table used in Egypt that is based on Egyptian data.

BRIEFLY NOTED- Complaints against civil servants can now be submitted online, head of the Administrative Prosecution Authority Essam El Minshawi said. Users can send an email, call the hotline on 16117, or post the complaint on the authority’ website, social media channels or WhatsApp account on 01050601888.

EARNINGS WATCH- Vodafone Group reported a 15.3% y-o-y growth in service revenues from Egypt, according to its earnings statement (pdf). Revenues during the first quarter of the group’s fiscal year, which runs from 1 April to 31 June, jumped to EGP 6.72 bn (EUR 361 mn), up from 5.83 bn (c. EUR 313 mn) in the same period last year. Global revenues dropped 1.4% y-o-y to EUR 10.51 bn, down from EUR 10.65 bn.

A rare Ottoman-era copy of the Quran is on display at the Hurghada Museum, which officially opened its doors in February before closing again because of the pandemic, reports Iqna. The Quran was calligraphed by Sayed Ali Al Nouri in the year 1259 of the Hijri calendar.

It’s a quiet morning for Egypt in the pages of the international press.

Egypt continues diplomatic blitz on Libya, GERD: President Abdel Fattah El Sisi continued the push he started over the weekend to win overseas backing for the country’s position on the Libyan conflict and the dispute with Ethiopia over the Grand Ethiopian Renaissance Dam (GERD).

El Sisi spoke by phone with South African President Cyril Ramaphosa to discuss the latest developments on the talks around the Grand Ethiopian Renaissance Dam (GERD), reiterating that the country seeks a fair and balanced agreement, and rejects any unilateral filling of the dam’s reservoir. Ramaphosa said he hopes “intensive coordination” between the sides would allow them to reach an agreement. The African Union under the presidency of South Africa sponsored the last round of GERD talks from 3-13 July, which ended without the parties reaching an agreement. El Sisi and Ramaphosa also discussed political solutions for the crisis in Libya, the statement said, without providing additional details.

Foreign Minister Sameh Shoukry discussed GERD, Libya, trade and covid-19 with UK Foreign Secretary Dominic Raab, according to a statement by the UK embassy in Egypt, which provided no additional details.

KfW Development Bank donates EUR 15 mn to UN World Food Program: The United Nations World Food Program (WFP) in Egypt will receive a EUR 15 mn contribution from the German KfW Development Bank, Al Mal reports, citing a statement by the UN Information Center in Cairo. The WFP and its local partners will use the funding to launch a new two-year program to support 136k low income families in rural areas, providing them with their food, school meals, educational support, and income-generating programs for women and youth.