You should be on the beach, but you’re thinking about investment + M&A…

It’s a busy news day on this second-to-last business day of the week — and we’re really looking forward to that last long weekend of summer after Manpower Minister Mohamed Saafan confirmed yesterday that the private sector will take this Thursday off to mark the Islamic New Year.

Topping the news this morning: Unemployment is up and hundreds of thousands of people have dropped out of the workforce thanks to covid-19 — but let’s wait until September and October figures come out before we start committing mass seppuku. The hope is that these are transient effects of the pandemic, although the collapse of the tourism industry will weigh on numbers for some time to come.

And the flood of investment and M&A news continues this morning — unusual for a mid-August day when many in the business community are on the beach (or still have sand in their hair as they prepare the kids for school). We’re taking this as a positive sign about sentiment in our wider community.

Speaking of school: A shout out this morning to all of the kids at Cairo American College, who are the first students in the country to go back for the 2020-2021 academic year. Be safe, kids.

And some (potentially) good news for parents of (some) graduating seniors in the UK system: The UK government has decided to abandon an algorithm that lowered students’ predicted grades after their tests were canceled due to covid-19, reports Reuters. The decision will affect IGCSE diploma students in Egypt whose grades “rely on British assessments,” the newswire notes. The algorithm came under fire for lowering the grades of at least 40% of students. Students will now be given the grade their teachers had predicted for them, without being subject to a curved grading system, the British government said on Monday.

We’re two weeks away from the month of September — and, with it, the start of budgeting season. Have you thought about what you want your company to look like in 2021?

The results of last week’s Senate elections are due tomorrow, with any runoffs set for 8-9 September. Voters will elect 200 members of the newly reconstituted upper house of parliament, with the other 100 set to be appointed by the presidency.

The Health Ministry reported 115 new covid-19 infections yesterday, down from 139 the day before. Egypt has now disclosed a total of 96,590 confirmed cases of covid-19. The ministry also reported 13 new deaths — the lowest single-day death count since 22 May — bringing the country’s total death toll to 5,173. We now have a total of 60,651 confirmed cases that have fully recovered.

Isolation hospitals will continue staffing covid-19 isolation facilities at their current capacity for the next two weeks, with the cabinet’s covid-19 committee set to reassess the situation at the beginning of next month, cabinet said in a statement yesterday. The committee is also preparing plans for how to handle a potential second wave of infections, the statement said, without providing further details.

Mosques across the country could resume Friday prayers soon if a proposal from the Endowments Ministry wins Cabinet approval. The ministry will present to the cabinet’s covid-19 committee its plan to gradually allow worshippers to attend mass Friday at its next meeting, Minister Mokhtar Gomaa said, according to a statement. The statement does not clarify whether the ministry has a proposed start date for the resumption of the prayers, or what the plan would entail.

Digital healthcare platform Altibbi has received some 20k calls a day through its covid-19 hotline launched in May, the company said in a statement (pdf) yesterday. Launched through a PPP with the Supreme Council of Universities, the number has connected Egyptians to 1.1k doctors who have answered enquiries about the covid-19 outbreak.

Inspired by nature to combine utmost comfort with a world of unparalleled privacy, Mesca’s signature design-led luxury hotel is an elegant amphitheater of sea, sky and sand, redefining waterfront hospitality on the Red Sea.

The kickoff of the Democratic national convention in the United States leads headlines across the pond this morning. We’ll be following a mix of the New York Times, Politico and Axios on this story. The official website for the Dems’ first-ever convention is here. The even runs through Thursday, which is when we’re looking forward to Crooked Media’s Pod Save America episode on Thursday night, live from the convention, as part of the pre-show that will ultimately include Biden’s acceptance speech and a string of speeches by party luminaries. For political junkies: The full convention schedule is here.

The FT is all over the “decoupling” of the global economy from Chinese manufacturing, with columnist Gideon Rachman writing yesterday that “business logic has been replaced by strategic rivalry” and suggesting that “countries and companies [around the world] are unlikely to be able to stay on the sidelines” as the US and China clash. Rachman was writing as a new study suggests that China’s share of global exports is falling as corporations re-think their supply chains in the wake of the pandemic — and amid the ongoing US-China trade war.

Will Bahrain and Sudan be the next regional countries to recognize Israel? That’s the suggestion from Israel’s intelligence minister, who suggested that Morocco could also be on the list and that “Oman and Saudi Arabia could potentially follow suit,” Bloomberg reports. The UAE established diplomatic ties with Israel less than a week ago and the two countries signed yesterday a second medical research and development accord yesterday, the Abu Dhabi Government Media Office said yesterday. Tel Aviv is also working on arranging direct flights to the Emirates, which would have to pass through Saudi airspace, Prime Minister Benjamin Netanyahu said, according to Bloomberg.

Google is threatening to charge Australians to search the internet if lawmakers pass a bill that would force tech companies to compensate media outlets for siphoned news content, according to The Associated Press.

Miss the sounds of the office during WFH? Berlin-based Kids Creative Agency created a WFH website that generates all the sounds you hear while working at the office. Imisstheoffice.eu. Think of it as a white noise generator on steroids, offering keyboards clacking, noisy printers, chatting colleagues and water coolers directly into your headphones. You can even choose how many colleagues are in your digital office to make it even more realistic. Want to know more? The Verge wrote a feature on the website.

Uber wants to be your errand-runner: The company has launched a delivery service called Connect in Egypt, the company announced in a statement (pdf). The feature enables app users to send packages to friends and family, and request drivers to pick up deliveries from nearby stores. Egypt is the first country in the MENA region to roll out the new service.

*** WE’RE HIRING: We’re looking for smart and talented people to join our team at Enterprise, which produces the newsletter you’re reading right now and Making It, our very first podcast. We offer the chance to work in a unique and casual work environment that promises to be intellectually challenging and rewarding. Enterprise is currently in the market for:

• A senior editorial leader, who will work on this product and help launch new products.
• A seasoned reporter to join our team and create stories and packages that fascinate and inform our readers.

Interested in applying? To apply for the editor / reporter positions, please submit your CV along with 2-3 writing samples and a solid cover letter telling us a bit about who you are and why you’re a good fit for our team. The CV is nice, but we’re much more interested in your clips and cover letter. Please submit all applications to jobs@enterprisemea.com.

Our roundup of last night’s talk shows is (temporarily) back from its hiatus to take note of an interview with Higher Education Minister Khaled Abdel Ghaffar that caught our attention.

The ministry is in talks with private universities to potentially “reassess” their tuition fees in light of the economic burdens students and their parents are under because of the pandemic, Abdel Ghaffar told Masaa DMC’s Eman El Hosary last night (watch, runtime: 22:15). The ministry does not have the authority to impose a mandatory pricing scheme, Abdel Ghaffar said, and is instead playing a regulatory role.

Universities will formulate a hybrid learning system within the next 30 days, and will also come up with a rotation schedule for students on campus at any given time, Abdel Ghaffar said. Hybrid learning systems involve students going to classes for two days a week, and continuing with remote learning for the remaining three days.

Egypt’s unemployment rate rose to a near two-year high in 2Q2020, hitting 9.6% as the covid-19 pandemic forced businesses to shutter and put a damper on economic activity, according to official figures (pdf) released by Capmas yesterday. The jobless count stood at 7.5% in the same quarter of last year and was at 7.7% in the first quarter of 2020 before rising to 9.2% in April as the government’s precautionary measures to counter the spread of the virus came into effect.

September’s PMI and jobless figures will be the next significant indicator in whether there’s a pickup in employment now we’ve exited lockdown restrictions. July’s purchasing managers’ index showed that the labor market was still feeling the effects of the three-month lockdown, with employment continuing to decline during the month. Respondents to the poll said this was mainly due to companies not replacing ex-employees who had left voluntarily. The pace of hiring typically slows in August and resumes in September and October — fueled by hiring managers and jobseekers returning from summer vacation, by “use or it or lose it” budgeting at companies, and by the annual fall budget process.

Putting our Fake Economist™ hat on for a moment: Capmas shows the labor force contracting from 28.1 mn participants in 2Q2019 (covering both employed and unemployed people) to 26.7 mn in the quarter just ended. Capmas chalks it up to the pandemic, saying that people were either (a) reluctant to work and so dropped out of the workforce or (b) were unable to look for a job because of the pandemic.

Women and youth seem to have been particularly hard hit: Women’s unemployment fell nearly 6 percentage points to 16.2% (suggesting to us that a large number of working moms left the workforce to stay home and look after kids), while youth unemployment was at 60% in the second quarter compared to nearly 85% a year ago. Men seem to have higher expectations that they’ll return to work: Unemployment among men rose to 8.5% in 2Q2020 compared to 4.5% in the first quarter of this year and to 4.2% in the same quarter last year.

M&A WATCH- Speed Medical, Cleopatra Hospital Group deny interest in Alex Medical: Speed Medical and Cleopatra Hospital Group (CHG) and Alexandria Medical Services yesterday denied (here and here — pdfs) reports that they are looking to buy embattled Indian bn’aire BR Shetty’s majority stake in Alexandria Medical. Al Mal earlier in the day reported that the two were among a group of investors looking to acquire Shetty’s 87.6% stake in the company, citing unnamed sources in the healthcare industry. Alexandria Medical Services also denied having knowledge (pdf) of any intent by Speed Medical and CHG to acquire the stake.

Abu Dhabi Commercial Bank was said to be involved in the talks. The sources claimed that NMC’s largest creditor Abu Dhabi Commercial Bank was in talks with potential bidders for the Alex Medical stake. The Emirati bank led an appeal at a UK court to place NMC into administration at the beginning of April, and had its application granted to appoint Alvarez & Marsal as administrators.

Why does BR Shetty’s name sound familiar to you? Alex Medical’s majority shareholder BR Shetty resigned as the company’s chairman earlier this year following allegations of fraud at his London Stock Exchange-listed Emirati health firm NMC Health and fintech startup Finablr. Once the largest healthcare firm in the UAE, NMC entered administration in April after an investigation revealed bns of USD in unreported debt. The company began selling off assets in May to raise funds to repay its creditors.

Alex Medical distanced itself from Shetty as the scandal unfolded and reassured investors that the company’s finances will not be affected by NMC’s insolvency.

In related news: Shetty has stepped down as co-chairman of Finablr and has left the company’s board, Reuters reports.

INVESTMENT WATCH- GEMS to invest EGP 1 bn to add four schools to its Egypt portfolio: Private-sector education provider GEMS has earmarked EGP 1 bn to build two new schools and to purchase two existing facilities over the coming year, GEMS CEO Ahmed Wahby announced at a presser yesterday to unveil its new partnership with ValU. The company is already going ahead with the new-build schools, with one facility in West Cairo and one in Rehab. GEMS’ current portfolio includes operating three schools in Madinaty and one in Al Rehab.

Background: GEMS, which operates in Egypt in a joint venture with EFG Hermes, yesterday signed an agreement with EFG Hermes’ e-finance platform ValU to provide tuition fee payment solutions to parents. These include low-interest bridge loans that would give parents breathing space to pay tuition fees in installments.

M&A WATCH- Bank Audi has not resumed talks with suitors interested in its Egypt assets since its shelved negotiations with First Abu Dhabi Bank (FAB) in May, CEO and Managing Director Mohamed Bedeir said, according to Al Masry Al Youm. The local press had suggested earlier this week that the Lebanese bank — which is looking to exit Egypt amid the financial crisis gripping Lebanon — could revive acquisition talks with FAB once the coronavirus pandemic subsides. The talks had come to a standstill earlier this year as FAB shifted its priorities towards supporting the UAE economy through the pandemic.

PRIVATIZATION WATCH- Could we be getting more clarity on the fate of the state privatization program this month? Finance industry lobby group ECMA is planning to discuss the state privatization program with Public Enterprises Minister Hisham Tawfik before the end of the month, ECMA Chairman Mohamed Maher told Al Mal. The ECMA sees clearing the way for the program to get off the ground as a priority in the coming period, as it would help spur new EGX listings and general activity on the capital market.

And that’s cool, but remember: Policymakers are looking for positive signals from the market that it’s time to go ahead with stake sales and new listings. Those conditions aren’t something Tawfik can conjure up, and his ministry is not the only one with assets moving through a privatization process.

Refresher on the program: The state privatization program, which was first unveiled in 2018, has seen transactions postponed multiple times due to global market turmoil. It was due to include both stake sales by already-listed companies — including Eastern Tobacco, Alexandria Oil and Minerals Company, Alexandria Container and Cargo Handling, Abou Kir Fertilizers, and Heliopolis Housing and Development (HHD) — as well as fresh IPOs.

What’s happened so far? Out of the two dozen companies initially covered in the program, Eastern Tobacco’s 4.5% secondary offering in March last year has been the sole transaction to materialize. HHD, meanwhile, scrapped its plans to offer a stake of up to 25%, which was set to include the sale of a 10% stake + management rights to a strategic investor, alongside another 15% on the bourse. The IPO of Banque du Caire — which was expected to be the country’s biggest sale of assets since 2006 — has also been postponed several times and is not expected to materialize before 2021.

Gov’t, CBE lay down framework for EGP 1.2 bn on-lending program for the country’s natgas transition: The Trade and Industry Ministry, the Central Bank of Egypt (CBE), and the MSME Development Agency are setting up a financing program through the country’s banks to extend EGP 1.2 bn in low-interest loans for car owners to convert their vehicles to run on dual-fuel engines, according to a cabinet statement. The government will make the funding available for on-lending through banks; loans to final borrowers will be for fixed terms, the statement says.

This is just phase one — and it will likely target vehicles used in public transport: Trade Minister Nevine Gameea previously estimated that the first phase of the engine conversion program — which would see 147k cabs and microbuses outfitted with dual-fuel engines over the course of three years — would cost EGP 1.2 bn. The first phase will be implemented in seven governorates with the infrastructure required to accommodate engines running on natural gas, and the remainder of the program will be expanded to the rest of the country.

Background: The Sisi administration earlier this year announced the multi-year plan to convert or replace 1.8 mn cars to run on both gasoline and natural gas for a total EGP 320 bn at the program’s completion. Once the initial three-year transition period has elapsed, 240k microbuses that run on diesel will be converted to dual engines that run on natural gas at a total cost of EGP 53 mn. The third stage will see 50k cabs more than 20 years old transitioned at an expected cost of EGP 10 bn. Vehicle owners with cars over 20 years old will be permitted to receive low-interest loans through the MSME Development Agency to purchase new dual-fuel vehicles, while those with younger vehicles will be able to access zero-interest finance to outfit them with new engines.

International oil and gas players will begin conducting seismic surveys in the Western Mediterranean in 4Q2020, Al Shorouk and Masrawy reported yesterday, each citing a source from the Egyptian Natural Gas Holding Company (EGAS). An unspecified number of companies will kick off the surveys as soon as the House of Representatives ratifies their exploration agreements, with more set to follow suit in 1H2021, the source said. One unnamed company has already received the green light from parliament to move ahead, Oil Minister Tarek El Molla said, according to Al Shorouk.

Expect to see the first exploration well drilled sometime next year, followed by more wells in 2022, as soon as seismic surveys are complete and the results analyzed, said the source. Smaller companies will be allowed to work alongside oil majors, and more parties are likely to pursue new concessions in the coming period, according to the source.

Background: The Oil Ministry granted seven concessions in the area to five international oil companies including Royal Dutch Shell, Chevron, BP, Total, and ExxonMobil after conducting its own seismic scan of the area. The deepwater oil and gas agreements were signed during February’s Egypt Petroleum Show.

Draft law to restructure the Egyptian Endowments Authority gets preliminary sign-off: The House general assembly yesterday approved in principle a proposed law to restructure the Religious Endowments Authority to bring it under the Religious Endowments (Awqaf) Ministry’s umbrella, and grant the authority the right to manage and invest endowment funds.

Also in the House: Covid-19 financing gets committee-level approval. The House Health Committee approved yesterday a USD 50 mn emergency loan from the World Bank’s International Development Association and a KD 1 mn grant from the Arab Fund for Economic and Social Development to help prevent and detect covid-19 infections and treat cases.

MOVES- Prime Fintech has a board of directors: Shireen Alkady (LinkedIn) has been tapped as executive chairman of the board of directors at Prime Fintech, while Prime Holding CEO Mohamed Maher (Linkedin) will be vice-chairman of the board, according to a statement (pdf). Prime Fintech’s board will also include CEO Mervat Erian (Linkedin), Prime Holding CFO Hisham Hassan (Linkedin), Managing Director and CEO of ADIB-Egypt Zeinab Hashem, Attijariwafa Bank Egypt Managing Director Halla Sakr. Notably, former Mobinil (now Orange) boss Osman Sultan has also joined the board. Sultan was most recently CEO of Du in the Emirates.

EARNINGS WATCH- AIH profits up 47% in 2Q2020: Arabia Investments Holding’s (AIH) net profits rose 47% to EGP 14 mn in 2Q2020, up from EGP 9.5 mn in the same period last year, according to a company earnings release (pdf). Revenues during the quarter increased to EGP 379 mn, up 9% from 2Q2019. Profits fell 28% y-o-y to EGP 23 mn during 1H2020, down from EGP 32 mn last year.

It’s another pleasantly quiet news day for Egypt in the international press. Al Monitor says tech startups could help pull the economy out of the covid doldrums as tourism dries up. The outlet also looks at the relocation of the residents of Alexandria’s Sayadeen village.

Egypt-Greece maritime demarcation accord ratified by parliament committee: The House Legislative Committee signed off yesterday on the agreement inked between Egypt and Greece this month to create a joint exclusive economic zone in the eastern Mediterreanean.

Benya Cables to supply fiber optic technology, equipment to Africa Data Centers: Africa Data Centers has signed a supply agreement with Egypt-based Benya Cables that will see Benya supplying “critical fiber optic technology and equipment” to serve seven major markets in Africa, according to an emailed statement (pdf). The value of the contract was not disclosed. Benya Cables is a subsidiary of ICT infrastructure contractor Benya Capital, which earlier this week signed a final agreement with the Arab Organization for Industrialization to build a EGP 1 bn fiber optic cable factory in the Suez Canal Economic Zone.

Siemens Energy has signed a long-term preventive maintenance contract with the Egyptian Ethylene and Derivatives Company (Ethydco) to work on their industrial complex in Alexandria, according to a press release (pdf). The German company will provide Ethydco with a 10-year service agreement that covers repairs and spare parts for three Siemens industrial gas turbines, which have been in operation since 2017 and produce 150 MW of electricity for the complex.

The New and Renewable Energy Authority (NREA) is set to sign today a final contract with Denmark’s Vestas to establish a EUR 260 mn, 250 MW wind power plant in Ras Ghareb, the local press reports, citing unnamed sources. The NREA had awarded the tender to Vestas back in February. The German Development Bank (KfW) and a number of European institutions will finance the plant.

Egypt has renewed an agreement with Iraq to import 12 mn bbl of crude oil over a six-month period, Oil Minister Tarek El Molla confirmed following a meeting with Iraq’s ambassador in Cairo Ahmed Nayef Al-Dulaimi, according to a cabinet statement.

The Supply Ministry is paying bakeries a higher fee for producing subsidized bread, according to a decision seen by Al Mal. Bakeries are required to purchase the raw materials for bread, primarily subsidized flour, from millers and then receive monetary compensation from the government for the end product. Bakeries that use diesel fuel will now pay EGP 265 per 100 kg sack of flour , up from EGP 240. Bakeries that use natural gas will now pay EGP 283 per sack, up from EGP 213 previously. Each sack of flour will now also yield more loaves, after the ministry decided to reduce the weight of each loaf to 90 grams from 110. Bakeries will now produce 1,450 loaves per sack, up from 1,250 loaves previously.  The ministry recalculated the cost of production to account for gas and diesel price increases, ministry spokesperson Ahmed Kamal told Reuters. Bakeries have been complaining that it is costing them more to produce bread due to the rice prices of raw materials.

CORRECTION- August 19, 2020

An earlier version of this story incorrectly said that bakeries are required to purchase wheat and flour. The story has also been updated to correctly outline how bakeries are compensated. 

Cairo for Investment and Real Estate Development (CIRA) has purchased 5 acres of land in New Sohag City for EGP 21.6 mn to build an international school, according to Al Mal, citing unnamed sources. The company plans to break ground on the school’s construction before the year is out, according to the sources. CIRA is planning to expand its footprint in Upper Egypt with more schools in the coming period, the sources say, without giving further details. The company has acquired land in several new cities — including New Mansoura and New Alamein — to establish education complexes.

Hotel occupancy rates in Hurghada and Sharm El Sheikh nosedived 53% and 51%, respectively, in 1H2020 amid a pandemic-induced slump in tourism, according to a Colliers International report (pdf). Cairo and Alexandria were less hard-hit than the Red Sea resort towns, with occupancy rates in the capital declining 47% and 46% in Alexandria. The report expects a rebound in occupancy rates in the next two years, penciling in a 56% jump in Cairo, followed by Hurghada (53%), Sharm El Sheikh (52%), and Alexandria (44%).

The Tourism Ministry is planning five museum openings over the next three months, including a new Sharm El Sheikh museum set to be inaugurated in October, according to a document seen by Al Mal. Other museums include the Royal Chariots Museum in Cairo, slated for inauguration this month and a museum in Cairo Airport, which is due to be up and running in September. The National Museum of Egyptian Civilization in Old Cairo and Kafr El Sheikh Museum, meanwhile, are both planned to open their doors in October.

The government is planning to make the National Authority for Tunnels (NAT) its own independent authority — akin to the National Railways Authority — to cut its reliance on government financing to maintain its operations, Transport Minister Kamil El Wazir told Sada El Balad’s Ahmed Moussa (watch, runtime: 8:47). The NAT will be required to cover its own operating expenses, which El Wazir said run at around EGP 8 bn. The authority’s revenues are currently only half of that, according to the minister.

Companies licensed to provide clearing and depository services will now be required to elect a board of directors with a minimum of five members and a maximum of nine under new Financial Regulatory Authority (FRA) guidelines issued yesterday. The guidelines require boards to include at least two independent members and at least one woman; all members will be selected through general assembly elections for three-year terms. The roles of chairman and CEO will need to be held by separate individuals. The FRA will release next week guidelines on ownership structure for clearing and depository companies, authority boss Mohamed Omran said.

EFG Hermes’ e-finance platform ValU is currently in talks with several unnamed banks for a new EGP 250 mn credit facility, CEO Mohamed El Feky said yesterday, according to Hapi Journal. The firm has already received offers for the loan and expects to sign final agreements before the year is out, El Feky said.

State-owned Holding Company for Spinning and Weaving is expected to receive by the end of this month a EUR 540 mn loan that the National Bank of Egypt arranged earlier this year from two unnamed Italian and Swiss banks, Public Enterprises Minister Hisham Tawfik said, according to Masrawy. The loan will be used to import new machinery, and will be guaranteed by Italy’s export credit agency SACE, Switzerland’s Export Risk Insurance SERV, and the Egyptian Finance Ministry.

President Abdel Fattah El Sisi has ratified a EGP 80 bn overdraft for the FY 2019-2020 state budget approved by the House last month. The overdraft, which will pay off the debt of state bodies, among other things, will not affect the state’s overall deficit, Finance Minister Mohamed Maait said in a statement.

Some 90 Ancient Egyptian artifacts will be on display for six months at the Prague National Museum in an exhibition titled “Kings of the Sun” as of the end of August, according to Masrawy. The artifacts were found during a Czech archaeological mission at the Abusir site, near Giza.