Trump, El Sisi are best of friends

Love is in the air between Washington and Cairo after US President Donald Trump called President Abdel Fattah El Sisi yesterday and affirmed his administration’s commitment to supporting the country, president spokesman Alaa Youssef said in a statement. The two discussed boosting cooperation in combating terrorism, which Trump lauded El Sisi for facing head-on, Al Masry Al Youm reports. At his first news briefing, White House press secretary Sean Spicer told reporters that Trump said he is committed to continuing to provide Egypt with military aid and coordinating to ensure the funds are directed towards the fight against terrorism, according to Al Shorouk. Trump also commended Sisi for his efforts to deal with Egypt’s economic challenges and offered to discuss how the US could support its economic reforms, said Spicer.Trump also said he is looking forward to El Sisi visiting him in Washington soon.

As we noted back in our year in review, Trump’s arrival could signal the US is coming back to the fold as one of our closest allies. The El Sisi administration’s multi-polar foreign policy had favored strengthening ties with Russia and China at the expense of the US, especially since the Obama administration’s perceived reluctance on delivering aid to Egypt following 30 June 2013. We know where The Donald stands on Russia and we hope things don’t get too complicated for us if he decides to start that trade war.

On that front, Trump formally withdrew the US from the Trans-Pacific Partnership trade agreement on Monday, fulfilling a key campaign promise, Reuters reports. And even that is working in our favor, as Bloomberg notes that his protectionist stance — which doesn’t appear to be subsiding — is leading to drops in the USD which is helping equity markets in Egypt and Saudi and currencies in other emerging markets.

Meanwhile, the UK is getting a head start on negotiating new trade deals with countries outside the European Union, despite EU officials saying the kingdom has no legal right to do so before exiting the bloc, Bloomberg reports.

We know this might make some of you a bit jealous, but we’re taking the rest of the week off. We’ve decided to bridge tomorrow’s national holiday with Thursday to give ourselves a much-needed long weekend. We’ll be back to our normal publishing schedule on Sunday.

The Global Oil & Gas Middle East & North Africa conference kicks off today at the Cairo International Convention Center.

More noise about the cabinet reshuffle: Following from the reports by Al Ahram that eight ministers will be replaced in the upcoming reshuffle, including an “economic” one, Al Mal’s source in parliament said the reshuffle will only encompass seven positions but will include the investment minister and the trade and industry’s. Other cabinet members reportedly facing the axe are the ministers of: education, higher education, health, and agriculture, along with the wildcard guess of the justice ministry as well. Other sources said consolidating the ministries of antiquities and tourism into one and reintroducing the information ministry are among the options being assessed. Part of why speculation is at all time high is that so many of the candidates tapped to replace current ministers have so far refused, Al Ahram reports. The reshuffle is expected to be completed by the start of next week.

More talks on LC debt-relief: Members of the Union of Egyptian Investors Associations will meet with Central Bank Governor Tarek Amer and Finance Minister Amr El Garhy this week to resume talks on the repayment of their pre-float LCs, Al Mal says. Members of the organization proposed a seven-year repayment period with at 7% interest rate at an earlier meeting with Prime Minister Sherif Ismail, where CBE officials had suggested setting an 18% interest rate.

We hope you’ll be watching the Egypt’s national team playing Ghana in the Africa Cup of Nations tomorrow at 9 pm, it’s hardest game to date in the competition. What’s at stake: Egypt needs to at least draw with Ghana and Mali needs to lose to Uganda if we ever stand a chance of moving to the knockout stages.

IMF Mission Chief to Egypt Chris Jarvis is set to visit Cairo sometime next month to assess progress on Egypt’s economic reform program. The USD 1.25 bn second tranche of the funding should be disbursed by 15 March, contingent on the results of the review. Meanwhile, CBE Governor Amer met with the House of Representatives economic subcommittee yesterday. He said the USD 2.75 bn first tranche of the IMF funding was added to the central bank’s reserves and not used to pay any debts, according to Al Borsa. He added that foreign investment in T-bills grew to EGP 10.2 bn since the EGP was floated in November, Al Mal reported. Amer said the trade deficit remains large — with imports coming in at USD 57 bn and exports reaching USD 19 bn — and that more efforts are needed to strengthen Egypt’s exports, reduce imports, and strengthen sectors including tourism and agriculture.

Applications to Flat6Labs Cairo are open to entrepreneurs now: Flat6Labs accelerator program selects up to 10 companies to join it each cycle, puts them on track to become a full-fledged scalable startup, and provides them with up to EGP 1 mn in funding. Companies that have completed previous Flat6Labs cycles include Instabug and Pushbots. You can apply here.

President Abdel Fattah El Sisi’s phone call with US President Donald Trump was the hot topic of the evening among the talking heads, with many viewing it as a positive step towards furthering relations.
Kol Youm’s Amr Adib said that the political relations between Egypt and the US “is seeing some relief” after slight tensions over the past few years due to the Obama administration’s perceived stance in Egypt towards the Muslim Brotherhood (watch; runtime: 15:49). Politics analyst Abdel Moneim Saeed called what we’re seeing a rapprochement built on the mutual goal of fighting terrorism (watch: runtime: 4:51).
You can always count on Hona Al Assema’s Lamees Al Hadidy to bring a more analytical approach to the table. Last night she hosted Former Arab League secretary-general Nabil Al Araby who warned against reading too much into the call. “It is hard to predict Trump’s policies,” said Al Araby (watch; runtime: 2:42). Lamees then spoke with Mohamed Hornai, member of Palestinian Fatah, who said that the Palestinian Authority is concerned about the possibility of moving the US embassy to Jerusalem (watch; runtime: 2:58).
Yahduth fi Masr’s Sherif Amer did a spotlight on CBE Governor Tarek Amer’s questioning at the House of Representatives on monetary policy, where (as expected) he was bombarded by questions on the exchange rate. Amer interviewed House Economics Committee member Amr El Gohary who said, “We agreed with the governor on the urgency of reducing imports, but were not convinced on the current monetary policy. We hoped the EGP floatation to happen in a more stable economic environment and that there were stronger social safety networks.” In other words, if ain’t broke, break it, then fix it.

On the topic of presidential pardons, sources told Amer that the second list of candidates which will receive a pardon is made up entirely of those arrested for protesting.

On Al Hayah Al Youm, secretary-general of the Social Fund for Development (SFD) Nevine Gamee’ told host Lobna Assal that 45% of the EGP 4bn in SME funding in 2016 went to outlying governorates, especially Upper Egypt. “This is a reflection of the strong demand for investment and financing over there,” Gamee’ said (watch: runtime: 3:51).

Is there a currency swap agreement with Russia coming? The government is considering entering into a currency swap agreement with Russia, a source told Al Mal. The agreement, which would be similar to the c. USD 2.62 bn one signed with China last December, would be used to strengthen the central bank’s reserves by providing foreign currency used in imports from Russia. The source said the negotiations for the swap are still in preliminary phases, but the government believes the agreement with China provided the basis for successful arrangement and could be replicated with Russia. Egypt had attempted a practically similar move in mid-2015 when the two countries flirted with the idea of accepting payment from Russian tourists in rubles and using the same currency to pay for wheat imports from Russia, but the proposals never materialized.

And speaking of Russian tourists, flights between Moscow and Cairo are not likely to resume before March, sources close to the matter in Cairo told Russian state-news agency TASS, continuing a tiring trend of delaying flights every time a windows computer in the airport needs an update. The two countries will sign an agreement on aviation security once Egyptian authorities complete the installation of newly purchased biometric scanners and finalize new security procedures. “Only after that will we talk about the timing of flight resumption,” the source said. “We can expect it by the end of February, and most likely in March.” Russian aviation security experts had visited Egypt earlier this month to inspect security at the Sharm El Sheikh and Hurghada airports.

The terms of EMRA’s gold exploration tender causing more concerns: Following remarks from Mark Campbell, CEO of Aton Resources, and Patrick Werr’s column in The National about, more concerns are being raised about the terms of the gold exploration tender the Egyptian Mineral Resources Authority (EMRA) put out. “I would be very surprised if anyone participated in this bid round with the current terms,” David Hall, CEO Thani Stratex Resources, told Bloomberg’s Salma El Wardany. Campbell phrased his view more diplomatically saying, instead of bidding for the new concession areas, his company “would rather focus on existing projects it has in Egypt.” Hall’s concerns center around the production sharing model EMRA insists on adopting, which, he says, give the government a share of the output but requires the company to carry “the full exploration expense.” Hall says that Egypt has an excellent geological potential, but a change is needed. “ [A production sharing agreement] can only work for oil investors, because they can recover their costs in a much shorter timeframe … In the case of gold, this doesn’t simply work, he says.

EMRA’s head Omar Taima said a number of companies have expressed interest in participating in the tender, but refused to identify any of them. He says “Egypt’s potential will put it, in under 10 years, among the biggest producers of gold in the world based on our level of gold reserves and the studies and expertise we have.”

One company not on Taima’s list is Centamin. The company, Egypt’s largest gold producer, will not be entering the bidding round as CEO Joseph El Raghy told Reuters bidding under EMRA’s terms is not economically viable. He says the terms include a 6% royalty payment, at least 50% production share, partial cost recovery before reaching cost sharing, and three bonus payments to EMRA, including one of at least USD 1 mn. “Combined, the proposed terms result in an effective tax rate that is by far one of the highest for mining globally,” El Raghy says. He believes the bid round, under the proposed terms, should be canceled “otherwise ground will be held by small companies for many years with no significant investment as was the case with all areas offered in 2006 and 2008.”

For the record, EMRA has withdrawn exploration licences from companies awarded concession areas in the Eastern Desert from 2007 to 2009 last June as well as 120 “abandoned” gold mines. The licences were withdrawn from the “smaller companies” as they were unable to meet production targets due to financial and operational challenges. Taima then said EMRA’s move left only four active mining companies in Egypt. One of them is Matz Holding, which at the time, had already seized operations on one of its two concession areas altogether and was forced by EMRA either to give up the rights to the other or find a new development partner for it. The other three active operators Taima mentioned at the time were: Centamin, Thani, and Aton Resources (then Alexander Nubia) — who all will indicated disinterest in entering EMRA’s bid round.

Dalia Khorshid is not happy with World Economic Forum (WEF)’s Inclusive Growth and Development Index (IDI): WEF’s IDI placed Egypt 73rd out of its sample of 79 countries and said, “The country struggles with many aspects of inclusive growth.” The Investment Ministry responded, according to Al Mal, saying it ignored the developments achieved in the last two years, and focused instead on the period between 2011 and 2015. The Ministry also believes WEF should have compared Egypt only to its “Lower Middle Income” peers and not the whole sample. It also stressed that the last two years have had some pivotal changes to the economic climate that would have improved Egypt’s ranking. We would have loved to see the Ministry acknowledge some of the shortfalls mentioned in the report and present a plan to address them instead.

The House of Representatives’ Industry Committee has resumed discussions on the automotive directive after announcing earlier this month it decided to postpone its review of the directive “pending further studies,” according to Al Shorouk. The directive — which would give incentives to local assemblers to go further up the value chain into manufacturing — has been very touch and go in parliament, which is being lobbied hard by car importers and assembly manufacturers to reject it. Automotive importers present at yesterday’s discussion stressed the importance of thoroughly reviewing the market’s needs before setting any numbers or targets in the directive. Strangely enough, the CBE has taken an interest in the automotive directive and is advancing an alternate measure and has formed a committee led by the policy’s detractors and is conducting its own study. From the looks of it, importers and assemblers are tussling over influence among decision makers.

We’re seeing other activity on the legislative front as the House Legislative Committee will be discussing the Industry Permits Act, which is expected to pass it “soon,” Federation of Egyptian Industries head Mohamed El Sewedy said, Al Borsa reports. Meanwhile, the Egyptian Council of State (Maglis El Dawla) has received the Bankruptcy Act and is set to begin its review of the legislation after completing its review of the Investment Act, government sources tell Al Borsa. According to the International Monetary Fund’s staff report on Egypt’s Extended Facility Fund, the Industry Permits Act is expected to be ready by March and the Bankruptcy Act by June.

National Bank of Kuwait (NBK) was also impacted by the EGP flotation. “The move by Egypt’s government in November to devalue the Egyptian currency resulted in a dip in the value of assets and liabilities held by its Egyptian subsidiary when converted to dinars, NBK said,” as per Reuters. The bank did not give an exact value to the “dip,” but the impact was clearly not too significant as NBK reported a 40% y-o-y increase in 4Q2016 net profit to approximately USD 248.9 mn. We reported yesterday on how the EGP float affected the bottom line of international companies including Schlumberger and Savola.

Egypt state television airs CCTV footage of Regeni: Egypt’s prosecutor general ordered state media services, on Monday, to broadcast footage (watch; runtime: 3:46) of Italian graduate student Giulio Regeni for the first time since he was found murdered last year, according to Reuters. In the video, Regeni is heard speaking to the head of Cairo’s street vendors’ union, Mohamed Abdallah, who had reported him to the police only weeks before he died, suspecting he could be a spy. Abdallah is heard repeatedly asking Regeni for money, without success, followed by Regeni explaining that he would help [him] to apply for a grant or workshop worth [GBP] 10,000, but that the union head can’t use the money for personal reasons. Abdallah told Reuters that reporting Regeni was his “national duty” and not revenge for not giving him money. The Associated Press and Ahram Online also have the story.

This comes as Amnesty International is asking Egyptian authorities to investigate alleged reports of extrajudicial killings committed by security forces in North Sinai, according to statement and its accompanying report.

President El Sisi’s phone call with The Donald topped coverage of Egypt in the foreign press, having been picked up The Wall Street Journal (paywall), the Associated Press, Reuters, Sputnik, and AFP, which the Daily Mail picked up, and a brief mention in The Washington Post. The coverage is largely focused on the fighting terrorism.

The footage aired on Egyptian state media of Giulio Regeni came in a close second, with the press looking lightly on the move. State TV cast him in the “sinister light” of the could-be spy, Sofia Lotto Persio writes for International Business Times.

Careem’s Egypt Managing Director Wael Fakharany spoke with Entrepreneur Middle East’s Aby Sam Thomas, about his new life in a “startup” after his time in Google. Speaking of his experience in the startup environment, Fakharany says: “you tinker with stuff, you make mistakes, you move at phenomenal speed, but you learn every single day.” He says, to master your position in startups, you’ll have to find ways to renew your energy as it is a draining environment, be detail-oriented, and stay on the path and do “the right thing always.” Fakharany spoke with us as part of our CEO poll series saying he believes the best sector to invest in right now in Egypt is fintech, and that the new business he would start today is something “that makes use of the sharing economy.”

Al Masry Al Youm columnist Amr El Shobaky says the case against Mohamed Aboutrika confuses political opponents with terrorists. Aboutrika is accused of financially supporting protesters at the Rabaa sit-in, but the protestors cannot all be considered terrorists, he says. The state itself admitted that all the protestors at the sit in could not be terrorists when it allowed for a safe exit for protesters before security forces raided the square.

Our friends at Thani Stratex sent us pictures of visible gold at Thani Dubai Mining’s new discovery at the Anbat-Shakoosh Project. The project is located in the Hodine concession in the Eastern Desert of Egypt, which geologically is part of the Arabian Nubian Shield. Thani Dubai acquired the Hodine concession in an international tender conducted by EMRA in 2006. The Anbat-Shakoosh belt contains a non-JORC compliant resource of around 540,000 oz of gold.

On the English literacy racket: Language centers that teach English as a foreign language in Egypt have become a cesspool. Take this shyster who runs a center called Not Courses, which claims to teach students how to speak English in an American accent. In this ludicrous ad (watch; runtime: 2:59), he slaps his student to get him to pronounce a word which after first five views of sounding like an odd mix of gurgling and gagging turned out to be “slap.” This is either a throwback to the Egyptian public education system, or the only way for the guy to teach a student a word he can’t pronounce is physical violence. After the video went viral, it was given its due ridicule by voice actor Marwan Younis (watch; runtime: 8:38). And it’s not just accents. A closer look at this venerable institution’s Facebook page reveals a rudimentary grasp of the English language. We hope this doesn’t discourage honest proprietors who know what they are doing from setting up shop so travesties like this (watch; runtime: 0:40) don’t pollute our airwaves again.

There has been a notable Increase in trade delegations to Africa recently after the adoption of the Africa export strategy earlier this week. Trade and Industry Minister Tarek Kabil will be accompanying 70 companies from the petrochemical, health, and energy sectors, to Kenya next month to discuss boosting trade opportunities between the two countries Al Borsa reports. The ministry is also sending a delegation to Eritrea to look into establishing new export markets, according to Al Masry Al Youm.

Speaking on the issue, Qalaa Holdings Managing Director Hisham El Khazindar said that having Africa constitute only 3% of Egypt’s export market is “unacceptable,” at AmCham’s Business in Africa special luncheon, Al Shorouk reports. Even major economies in Africa like Nigeria only occupy 0.3% of Egypt’s exports, said IBM Egypt General Manager Amr Talaat. Qalaa Holdings hosted the annual meeting of the Choiseul 100 Africa laureates, held for the first time in Cairo.

Canada should take a “firmer stance” against the members of Ikhwan living on its soil because they are a threat to global security, House Speaker Ali Abdel Aal told a Canadian parliamentary delegation on Monday, according to AMAY.

The Gaza Strip’s top Hamas official Ismail Haniyeh is in Egypt for meetings with security officials in the highest level visit from Hamas since the 30 June uprising, the Associated Press reported. Egypt had tightened its grip on the Gaza blockade since 2013 but is showing signs of thawing relations.

Foreign Affairs Minister Sameh Shoukry is in Tunisia to meet with Tunisian President Beji Caid Essebsi, and his counterpart Khemaies Jhinaoui to discuss regional security, the Ministry said in a statement. Tunisia is working to coordinate the positions of Egypt, Tunisia and Algeria on Libya to restart the country’s stalled progression towards a political settlement, unnamed sources told Ahram Online.

Investor are losing appetite for wind farm projects under the feed-in tariff (FiT) program following the EGP float. The terms for wind farm projects under the second phase of the FiT program are challenging and the costs of building wind farms are high, Infinity Solar HR Director Hisham El Gamal told Al Borsa. The company is currently reevaluating projects for FiT’s second phase and is studying partnering with another firm to reduce cost of studies, he added. The tariffs for wind projects are low compared to the high cost of building materials and a 24 months period to complete studies and building the project, said Desert Technologies head of project development Mohamed El Dal’y said. We had reported previously that the solar power companies had approached the ministry on amending the contracts to account for the EGP float, but the ministry refused. In other FiT news, The Egyptian Electricity Holding Company feed-in tariff (FiT) unit has reportedly delayed announcing the winning companies under the first phase of the FiT program indefinitely to complete revising documents submitted by the applicant companies , Al Mal reports.

The Electricity Ministry should be signing the contract with Toyota, JD France, and Orascom for the 250 MW wind farm in the Gulf of Suez within weeks, now that it has finished amending contentious clauses to allow for international arbitration in dispute resolution, Al Borsa reports. The Egyptian Electricity Transmission Company will be purchasing power from the Toyota-led consortium at USD 0.046 per KWh for a period of 25 years, Electricity Ministry officials told the newspaper. Toyota is reportedly close to securing the EUR 250 mn needed to finance the project.

The Egyptian Electricity Transmission Company (EETC) has postponed negotiations with six companies to establish four power transformer stations with an investment value of USD 250 mn due to a lack of liquidity, unidentified sources from the Electricity Ministry told Al Borsa. The EETC is currently looking into arranging a loan from the National Bank of Egypt, and plans on relaunching negotiations mid-February.

Siemens is still on track to making the three combined-cycle power plants fully operational next month despite challenges presented by the EGP’s devaluation, CEO Joe Kaeser confirmed to Sky News Arabia (watch, runtime 7:14). Siemens investment strategy in the Middle East will focus on infrastructure and health projects primarily in the coming period. The company will also allocate USD 5 bn to energy project research in the Middle East in 2017, Kaeser added.

Cheese maker Obour Land is targeting an annual growth rate of 25-30% in FY2017, the company said in a statement. Obour Land is looking to grow its carton-packed white cheese market share to 42% by the end of FY2017, and 45% by end of FY2018. The company says it gradually increased its selling prices during the course of FY2016 by 46%, to an average price of EGP 20 per kg by the beginning of 2017 and will continue hiking prices to an average price of EGP 23-23.5 per kg by 2Q2017. The price increases, Obour Land says, are necessary in order to pass on the increase in production costs while sustaining healthy sales volumes should the FX rate stay at levels between EGP 19.5-20 per USD 1.

The Suez Canal Economic Zone (SCZone) has reached an agreement with an unnamed Kuwaiti investment fund to establish a 150k cubic feet desalination plant, Chief Ahmed Darwish says. The SCZone plans to increase its output to 250k cubic feet in the future, according to Al Borsa. On a related note, the SCZone is considering pricing water to companies in the zone at USD 0.6 per cubic feet. The CBE had agreed to allow the SCZone to collect utility bills at the zone in USD to the chagrin of companies stationed there.

President Abdel Fattah El Sisi passed a law to hike healthcare spending on school-age children to EGP 9 bn in hopes of alleviating the burden of rising meds prices, Al Ahram reports. According to Deputy Finance Minister Mohamed Maait, the increased expenditures will be covered by the sin tax on cigarette sales, as well as fees imposed on services such as issuing a birth certificate.

Banque Misr, National Bank of Egypt (NBE), and CIB are preparing to issue a multiple-tranche asset-backed securitized bonds with a total value of EGP 1.148 bn through the Egyptian Securitization Company on behalf of CIB subsidiary Corplease, NBE Deputy Chairman Mahmoud Montasser told Al Mal. NBE is issuing 40% of the securitized bonds, while Banque Misr will issue 33%, and CIB the remaining 27% of the total issuance, he added. The bond issuance is the sixth of its kind, with the previous issuances weighing a total value of EGP 2.7 bn, said Montasser. The issuance comes after receiving national scale ratings on the multiple tranches from Middle East Rating & Investors Service and EFSA approval.

The International Cooperation Ministry will be allocating 50% of all SME grants to women in 2017, which President Abdel Fattah El Sisi previously declared to be the Year of Women, according to a ministry statement.

Egypt’s non-oil exports grew 8.6% year-on-year to USD 20.1 bn in 2016, Trade Minister Tarek Kabil said, according Al Borsa. This comes as tourism revenues reportedly declined by 44.3% y-o-y in 2016.

The Finance Ministry has denied it is going to disburse public sector salaries over two installments each month, Ahram Gate reported. Instead, government salaries will be paid between 25th and 28th of every month, with any extra compensation disbursed on the 10th, the Cabinet’s information and decision support center said.

The House of Representatives sanctioned extending the state of emergency in Sinai for an additional three months, Al Ahram reports, as well as the National Defense Council’s decision to extend Egypt’s military participation in the Saudi Arabian-led military operation in Yemen, according to Al Shorouk.

Tourism officials brought up on charges of bribery: Prosecutor General Nabil Sadek has referred the case of Egyptian General Company for Tourism and Hotels Managing Director for Technical Affairs Mamdouh Mohamed Abdo Ratab and four other defendants to the Cairo Criminal Court after completing the investigation, Al Borsa reported. Ratab is accused of requesting and receiving three separate bribes to task hotel renewal projects at the JW Marriott Hotel, the Cairo Marriott Hotel, and the Mena House Hotel to specific suppliers and contractors. Three of the defendants have admitted to paying bribes, the investigation report said, which included recordings allegedly implicating the accused. We recently reported on a Finance Ministry real estate tax advisor was arrested on bribery charges to sell state land at below market value.

Egyptian box office hit Mawlana is causing backlash from Sunni Muslim clerics, Reuters reports. The film, which highlights the relationship between the religious establishment and the state, has been accused of tarnishing the image of Al-Azhar just as it steps up efforts to rein in violent extremism. You can watch Mawlana’s official trailer with English subtitles here (runtime 01:50).