AM — Imbaba church fire leaves at least 41 dead

Hello, everyone. We’re feeling more than a bit muted this morning after a fire yesterday at a church in Imbaba killed more than 40 people. Please join us in having a good thought for the families of the victims.

WATCH THIS SPACE- Car dealers that haven’t delivered vehicles could face prosecution: The Consumer Protection Agency (CPA) will soon send a list of names of car dealers that have yet to deliver cars to consumers who booked them before 12 April to the prosecution, Al Borsa quotes a CPA source as saying.

Refresher: The consumer watchdog in May ordered distributors to fully return down payments with 18% interest to anyone who had ordered vehicles before 12 April and wants a refund. Those who still want their vehicles have full price protection (that is, companies are forbidden from retrospectively hiking prices on cars ordered before 12 April due to inflation).

HAPPENING THIS WEEK + THE NEXT-

Expect more details on how gov’t plans to cut back on electricity: The Electricity Ministry will hold a press conference in the next few days to announce details of measures to curb electricity use that cabinet approved last week, Electricity Minister Mohamed Shaker reportedly told Al Mal.

REMEMBER- The government is seeking to cut domestic electricity consumption to redirect for export some 15% of the natural gas that currently gets sent to power stations, netting itself an extra USD 450 mn a month in revenues to help shore up FX liquidity. Expect to see darker streets, public squares, government buildings and sports facilities, as well as a 25°C lower limit on A/Cs in malls, among other measures.

MNHD shareholders have the final word on SODIC takeover bid: Madinet Nasr Housing and Development will hold a general assembly meeting on Tuesday, 16 August, to decide whether to allow SODIC to conduct due diligence ahead of a potential takeover.

Interest rates: The Central Bank of Egypt will meet to discuss interest rates on Thursday, 18 August. There was little consensus about what the Monetary Policy Committee is likely to do in our customary poll, where five of the eight analysts we talked to see the interest rates rising by up to 100 bps this week.

The Madbouly government will hold another two rounds of consultations on its privatization strategy tomorrow and Thursday: Chemical producers are up tomorrow while players in the mining sector are up on Thursday. Every Sunday, Tuesday, and Thursday see workshops on how privatization plans will affect specific industries. You can find more details on the schedule of the meetings here.

National Dialogue: The board of trustees overseeing the National Dialogue will hold its next meeting on 27 August. On the agenda: Choosing the rapporteurs for all of the committees and subcommittees of the social, political and economic tracks, and preparing the agenda and topics of discussion for the dialogue.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

MORNING MUST READ-

Global commodity prices might be falling, but there’s no quick fix to the damage to global food supply caused by the war in Ukraine, David Lynch writes for the Washington Post. Developing countries that rely on exports for key commodities have yet to reap the rewards of falling prices, and might not be able to for months, according to analysts, who say that changes in the global markets could take months — up to a year, according to the IMF — to filter down to local economies. What’s more, the lower prices are often offset by the weaker currencies of food importers: the red-hot greenback, which surged to 20-year highs earlier this year, has made the price of importing global commodities significantly more expensive for developing nations.

The possibility of more volatility is still very real: “The worst didn’t happen… but there’s a false sense of security in the markets right now,” said one expert. “This fall could have a lot more volatility.” Potential issues with the UN- and Turkey-brokered grain pact, an imminent Russian energy embargo that could drive fertilizer prices further up, and continuing droughts are all persistent threats to global food security.

DATA POINT- Egypt has produced 9.7 mn tons of wheat this season, Naeem Moselhy, advisor to the agriculture minister, told CNBC Arabia yesterday (watch, runtime: 1:43). This is up around 7.8% from last season, when we produced 9 mn tons. The government earlier this year provided incentives to local farmers to increase production in light of Russia’s invasion of Ukraine threatening about 80% of our imports. Some 4 mn tons of the local wheat were procured by the government against the 6 mn tons targeted by the government.

SPEAKING OF WHEAT- A Ukrainian grain ship reportedly disappeared on its way to Egypt — then shows up en route to Syria: The first grain carrier to make it through a safe corridor out of Ukraine’s ports showed up yesterday near Syria’s Tartous port, Reuters reported citing two shipping sources. The ship was headed to Egypt when its transponder went dark off the north-west coast of Cyprus on Friday morning, according to the Financial Times. The cargo had been rejected by its initial buyers in Lebanon because it was stranded for months in Ukraine.

THE BIG STORY ABROAD-

The attack on Salman Rushdie on Friday is still getting plenty of attention globally: Rushdie, who suffered serious injuries after being stabbed during an event in New York, is “on the road to recovery,” his agent said yesterday. (AP | Reuters | WSJ | FT)

MARKET WATCH-

Are US stocks really out of the woods? While US stocks staged a rebound last week on hopes that the Federal Reserve could soon change tack and slow the pace of its rate hikes, some investors remain skeptical that this is the end of the market rout, the Wall Street Journal reports. Part of the skepticism is coming from the fact that many of the stocks staging a comeback were among those that plunged the most during the sell-off in the first half of the year. Those include meme stocks — like Bed Bath and Beyond and AMC Entertainment Holdings, which have climbed 107% and 111% respectively since they bottomed out in June — and crypto-related companies like Coinbase. Most investors are remaining prudent with the companies they put their money in for the foreseeable future, the WSJ writes, as the Fed’s trajectory remains uncertain and signs of an economic slowdown remain clear.

AND- What Chinese factory owners are saying right now doesn’t bode well for the direction of the global economy: Chinese exporters are expecting a drop in global demand thanks to soaring inflation in Europe and the US. Orders for certain products fell as much as 30% in July and August from last year while some factories say their European clients are ordering less than half of what they did last year, according to Bloomberg, which interviewed more than a dozen Chinese export managers.

THE TAKEAWAY- “The general direction is export growth will slow down in the coming months, and it’s possible to reach a negative territory by the end of the year,” one economist told the business newswire.

ICYMI-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we looked at Egypt’s non-oil exports during the first six months of the year.

*** 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: The 2022-2023 school year at Egypt’s private + international K-12 schools is kicking off in the coming weeks. Today, we run through the tuition fees being charged at the country’s major schools.

At least 41 people were killed yesterday when a fire broke out during mass at the Abu Sefein church in Imbaba, the Coptic Church said in a statement. The Health Ministry said that 55 people were taken to hospital for treatment. Most of those killed in the blaze were children, Reuters reported citing two sources.

The fire was caused by a short circuit in an A/C unit on the second floor of the church, the Interior Ministry said in a statement. The blaze blocked an entrance to the church, triggering a stampede among the hundreds of worshippers attending mass, security sources told Reuters. Prosecutors have launched an investigation into the incident, the Public Prosecution said.

Families of the deceased will get financial compensation from the state: Each family who lost a loved one in the fire will receive immediate compensation of EGP 100k, Prime Minister Moustafa Madbouly said in TV comments reported by Youm7, while the families of the injured will receive up to EGP 20k, he added. Social Solidarity Minister Nevine El Kabbaj earlier stated that families will also receive an additional EGP 50k in compensation from civil society organizations and Al-Azhar. The seat of Sunni knowledge said yesterday that it would immediately make donations to the families of victims and that its hospitals were on standby to receive the injured.

President Abdel Fattah El Sisi is “closely following the developments of the tragic accident,” he said in a statement. “I directed all concerned state agencies and institutions to take all necessary measures, and to immediately deal with this accident and its effects.” El Sisi and Prime Minister Moustafa Madbouly both called the head of the Coptic Church, Pope Tawadros II, to offer their condolences, according to official statements by Ittihadiya and the cabinet.

The Armed Forces’ engineering authority will restore and renovate the church, the Coptic Church said in a separate statement.

Condolences poured in: The World Health Organization (WHO), the European Union Delegation to Egypt, and UNICEF Egypt all expressed their condolences to the victims’ families, along with embassies of various countries to Egypt (US, Russia, France, Belgium, New Zealand, Switzerland). Leaders of Arab countries, including Qatar, Tunisia and Saudi Arabia, also sent El Sisi their condolences.

The story leads the conversation on Egypt in the international press this morning: Associated Press | Reuters | AFP | Wall Street Journal | Bloomberg | New York Times | BBC | CNN | The Guardian | Euronews | Sky News.

The EGX just got an “undo” button on suspicious bourse trades: The Financial Regulatory Authority (FRA) has approved a proposal from the EGX allowing it to prompt securities brokers to reverse transactions that appear to have violated trading rules, according to an EGX press release. The move hands the bourse a policy tool to reverse suspect trades while avoiding more extreme action that could impact market stability, the press release read. The EGX will sort out how to make sure that any reversed transactions would be set aside in the calculation of any given share’s closing price, it added.

How it works: Under the rules — which have long been in place, but have not been enforced until now — the EGX can immediately compel the buyer to sell the shares back to the seller, reversing the transaction.

The regulators still have teeth: The EGX also got FRA approval to expand the use of “other measures” to crack down on trading violations, the statement said, without providing further information.

The retail component of Ghazl El Mahalla’s IPO has been extended for another two weeks until 28 August due to weak investor demand, according to an EGX bulletin. Subscription was supposed to close yesterday, but the football club has so far only received bids for around 22% of the shares allocated to the public, Mohamed Maher, CEO of bookrunner Prime Holding, told Masrawy yesterday. Maher blamed poor market conditions for the slow uptake, which has already seen the deadline extended once this summer.

Where things stand: The club has allocated 98 mn shares to the retail component of the IPO and is selling them for EGP 1.02 apiece. It has raised just EGP 22 mn from between 600 and 700 investors since subscription opened almost two months ago, the news outlet reported Maher as saying.

This is the second time the deadline to close the retail component of the offering has been pushed. The football club extended the offering by six weeks at the beginning of July after receiving bids for less than 10% of the shares on offer in the original three-week subscription period. It also opened up the public offering to institutional buyers by allowing investors to purchase up to 15 mn shares, up from an original cap of 2 mn.

REMEMBER-

#1- It’s a tough time for new listings. The EGX 30 has fallen more than 16% this year as global markets struggle due to the conflict in the Ukraine, inflationary pressure, rising interest rates, and a deep correction in many high-profile western markets.

#2- This share sale is tiny and potentially consequential only in the sense that it might convince other clubs (we’re looking at you, Al Ahly) to go public.

BACKGROUND- Ghazl El Mahalla is offering a 67.5% stake in its IPO, which is expected to raise EGP 135 mn. The club raised EGP 37 mn during the institutional component of the offering in November.

Cabinet lays out criteria for strategic + national projects: Projects in electricity and renewable energy, petroleum, mineral resources, transport, CIT, housing, tourism, youth and sports, and military production could be considered a national or strategic project under a set of criteria the Madbouly cabinet approved on Thursday, according to a statement.

To qualify, projects in these fields must also fulfill at least two of the following criteria:

• Contributing to the country’s export volumes by exporting at least 50% of its total production output each year, within a maximum of three years of starting operations;
• Helping to slash imports and localize manufacturing, while meeting a minimum 50% local component quota;
• Relying on financing from foreign funders and investors, with the funding transferred from abroad through an Egyptian bank;
• Setting up or operating the project in one of the areas cabinet previously identified as most in need of development;
• Contributing to localizing new and advanced technology in Egypt and transferring know-how;
• Supporting innovation, development, and scientific research;
• Contributing to securing the country’s supply of strategic commodities and cutting down on their imports;
• Relying mostly on Egyptian laborers;
• Contributing to climate goals, including reducing emissions.

ALSO- Minimum capital requirements for sole proprietorships slashed: Establishing a sole proprietorship now has a minimum capital requirement of EGP 1k, down from EGP 50k previously, after cabinet approved amendments to the Companies Act, the statement said. The reduced requirement is designed to encourage entrepreneurs and startups to set up businesses in their own name and reel in more investments.

IN OTHER REGULATION NEWS-

Cabinet in a separate meeting approved measures meant to make it easier for industrial developers to buy land, a statement read. A government committee has approved a per-meter pricing mechanism to sell state-owned land to industry that takes into account the cost of utilities and is set to offer more attractive prices to investors, the statement read. Cabinet also agreed to extend the 7% interest rate on installment plans for industrial land for another three years.

Edita Food Industries has started operations at its new EGP 135 mn production line, which is set to increase Edita’s production of baked goods by 20% (11 mn tons) a year, the company said in an EGX disclosure (pdf) yesterday. This marks the company’s eighth production line for its baked goods segment and comes amid rising demand for its Molto range. The company had pledged some EGP 400 mn this year in investments for production expansion in Egypt and Morocco.

CORRECTION- This story was corrected on 15 August, 2022 to reflect the following changes: Edita’s new production line is increasing its baked goods production by 11 mn tons per year. This is not the new total capacity. The company’s EGP 400 mn investment is also going towards overall production expansion in Egypt and Morocco, not specifically for its wafer segment.

The region’s first nano-financial services provider, Kashat, has launched in nine new governorates in Egypt, the company said in a press release (pdf). The company is now operating in 24 of the country’s 26 governorates, putting its services in reach of 100.4 mn people. Kashat has raised its loan limit to EGP 2k to accommodate more of the country’s unbanked population. Kashat users can also now withdraw and repay their loans through all telecom and bank e-wallets available in Egypt, according to the statement.

IN OTHER STARTUP NEWS-

Dubai-based foodtech startup Grubtech has partnered with Saudi SME fintech player Geidea to provide POS services in Egypt. Grubtech launched in Egypt in June. (Statement)

GB Auto net income up 31% in 2Q despite market challenges: GB Auto shrugged off the multiple headwinds facing the Egyptian automotive sector in 2Q 2022, announcing yesterday that its bottom line grew by almost a third during the quarter thanks to strong consumer demand. The company posted a net income of EGP 490.5 mn during the April-June period, up 31% from 2Q 2021, despite import restrictions, the devaluation of the EGP, and inflation weighing on the sector, the company said in its latest earnings release (pdf). Revenues rose almost 8% to EGP 7.83 bn, which the company attributed to “resilient” demand and “improved pricing strategies.”

Auto revenues stable + NBFS drives growth: Revenues from the auto and auto-related segment rose 1.1% y-o-y to EGP 5.82 bn as an “optimized product portfolio,” an enhanced pricing strategy, and a move to increase inventory levels helped to offset market headwinds. Revenue growth from commercial vehicles and after-sales offset a 6.5% y-o-y fall in passenger car sales and a 33% decline in motorcycle sales. The company’s non-bank financial services arm, GB Capital, saw revenues rise 27% y-o-y to EGP 2.36 bn and doubled its net income to EGP 276.9 mn thanks in part to strong growth at MNT-Halan.

Remember: All is not well in the local car market. The local passenger car market contracted by 33% y-o-y and 32% q-o-q during 2Q due to import restrictions and a slowdown in opening letters of credit (L/Cs), GB Auto said.

Looking ahead: “In the coming period, we will remain focused on maximizing margins on the available inventory and minimizing overheads until the import situation improves,” said CEO Nader Ghabbour. “Challenging conditions are likely to persist for a number of quarters; however, we are confident in our ability to effectively respond to changing dynamics and carry forward with our growth targets once the economic situation improves,” said Ghabbour.

Ibnsina cuts full-year outlook amid challenging conditions: Ibnsina Pharma’s net income fell 48% in 2Q 2022 as the EGP devaluation, rising inflation and supply chain disruptions hit the company’s finances. The company reported a bottom line of EGP 28.4 mn compared to EGP 59 mn in 2Q 2021, while revenues declined 8% to EGP 4.93 bn, according to figures in the company’s latest earnings release (pdf). The company noted that the slide in the EGP against the greenback had a pronounced impact on costs, prompting the company to take steps to curb OPEX growth by “optimizing” expenses including salaries, electricity usage and packing.

ALSO FROM IBNSINA-

The pharma firm’s investment arm AIM is eyeing investments in the logistics and healthcare sectors, with plans to invest in a hospital within two months, Al Borsa reports, without disclosing the size of the investment. AIM has a EGP 280 mn investment budget to make acquisitions in logistics and digital transformation, said co-CEO Mahmoud Abdel Gawad in the earnings release.

Huawei has appointed Jim Liu as CEO of Huawei Egypt, succeeding Vincent Sun, the company said in a statement (pdf). Liu has been with the Chinese tech firm since 2005 and was previously CEO of its Congo office.

The Transport Ministry has appointed Mohamed Abdel Aziz Amer as the new chairman of Egyptian National Railways (ENR), who will replace Moustafa Abu El Makarem, who is stepping aside due to health considerations, according to a ministry statement. Amer previously served as the vice chairman of ENR’s board for the mobile units’ maintenance and technical support sector.

President Abdel Fattah El Sisi has appointed Mahmoud Abdel Gawad as the new commander of the Air Force, replacing Mohamed Abbas Helmy, who was yesterday sworn in as the new civil aviation minister following this weekend’s surprise cabinet shuffle. Abdel Gawad was most recently the chief of staff of the Air Force.

The fire at the Abu Sefein church in Imbaba dominated coverage on the airwaves last night. The incident and its aftermath got coverage from El Hekaya’s Amr Adib (watch, runtime: 2:19 | 7:19), who spoke with Social Solidarity Minister Nevine El Qabbaj and Health Minister Khaled Abdel Ghaffar. Most of the injured are currently in a stable condition, with only one critical case at the moment, Abdel Ghaffar said. The tragic incident also got extensive coverage from Al Hayah Al Youm (watch, runtime: 1:28:39), Masaa DMC (watch, runtime: 1:02) and Ala Mas’ouleety (watch, runtime: 4:15 | 5:06).

We officially have a new cabinet: Thirteen new cabinet ministers were sworn into office yesterday by President Abdel Fattah El Sisi, according to an Ittihadiya statement, a day after the House of Representatives approved a cabinet shakeup in a previously unscheduled session called by the president. The news got coverage from Masaa DMC (watch, runtime: 1:47) and Al Hayah Al Youm (watch, runtime: 4:54).

ALSO- The socialists got lots of air time last night after this weekend’s surprise cabinet shuffle. The question of the evening:

Could the new public enterprises minister u-turn on the liquidation of El Nasr Coke? Public Enterprises Minister Mahmoud Esmat has postponed a Metallurgical Industries Holding (MIH) general assembly meeting that was due today to discuss plans to liquidate the financially-stricken El Nasr Coke and Chemicals, Mostafa Bakry told Ala Mas’ouleety (watch, runtime: 10:23). Bakry, a perennial opponent of closing loss-making state-owned enterprises, described the decision as a “good sign” about the new minister, who was officially sworn into his position yesterday, replacing Hisham Tawfik.

Tawfik’s plans to liquidate debt-ridden state companies have received a lot of pushback from leftist MPs, who argued that some of the companies’ financials do not warrant liquidation. El Nasr Coke has generated EGP 114 mn in income over the past year, Bakry claimed, and it also receives offers from European countries for 1 mn tons of exports annually, he added.

POLICY WATCH- Esmat takes the reins at the Public Enterprises Ministry at a critical time when the government is putting together a radical privatization strategy that it hopes will see private enterprise double its share of the economy over the next three years. The Madbouly government is aiming to lure USD 40 bn in investment over the next four years by selling stakes in state-owned companies, and as such, policy continuity at the ministry will be important to persuading more foreign companies to invest in Egypt.

Yesterday’s tragic events at the Abu Sefein church in Imbaba are being picked up everywhere in the international press this morning, as we note in our coverage above.

Carpet maker Oriental Weavers is planning to build a USD 50 mn factory in Tenth of Ramadan over the next three years after offloading its Chinese unit, Al Mal reports.

CORRECTION- This story was amended on 15 August to correct the investment value of Oriental Weavers’ new factory. Representatives from the company confirmed to Enterprise that it is investing USD 50 mn, not USD 200 mn. 

Other things we’re keeping an eye on this morning:

• Egypt is planning to increase the capacity of its electricity link with Sudan from 80 MW to 300 MW in December, according to a source at the Electricity Ministry. (Youm7)
• The Tourism Ministry has hired advertising agency McCann to manage a new promotional campaign. (Statement)
• A microbus crash in Minya killed at least nine people and injured 18 others yesterday, after a tire blowout led the vehicle to overturn on a highway. (Ahram Gate)

Ethiopian Prime Minister Abiy Ahmed called on Egypt and Sudan to return to “peaceful” negotiations over the Grand Ethiopian Renaissance Dam (GERD) at a press conference last week announcing the completion of the dam’s third filling. “Peaceful negotiations and genuine discussions over the GERD will bear [more] fruitful results than any other alternative,” Ahmed said, according to an Ethiopian Foreign Ministry statement.

Background: Talks between Egypt, Ethiopia, and Sudan over filling and operating the dam have been at a standstill for a year, when Ethiopia unilaterally embarked on the second filling of the dam’s reservoir and Egypt and Sudan pulled out of the African Union-led negotiations. The UAE earlier this month tried to inject new momentum into the diplomatic process and called on the three countries to return to talks with the AU. President Abdel Fattah El Sisi said a few days later that Egypt would continue pursuing a diplomatic approach to the dispute.

ALSO IN THE DIPLO SPHERE- Shoukry + Canadian international development minister talk climate change, food security: Foreign Minister Sameh Shoukry met Canadian International Development Minister Harjit Sajjan in Cairo yesterday to discuss climate change, food security and boosting bilateral cooperation, according to a Foreign Ministry statement.

The UN’s next climate chief will come from an island nation: Grenada’s former climate minister Simon Stiell is in line to replace Patricia Espinosa as executive secretary of the UN Framework Convention on Climate Change (UNFCCC), Reuters reports, citing diplomatic sources familiar with the matter. Espinosa completed her second, three-year term in July. The sources are cited as saying that Stiell will take the helm at the UNFCCC a few months ahead of COP27 in November.

Europe gas pipeline could be ready in nine months: A new European gas pipeline connecting Portugal to central Europe could be up and running within nine months, Spain’s energy minister said Friday, according to the Financial Times. This came after German Chancellor Olaf Scholz backed the construction of a new European pipeline to help wean the continent off of Russian energy and stave off an energy crisis.