The dog days of summer

It’s the accidental diplomacy issue here at Enterprise, with the local press being largely preoccupied with foreign affairs as the business community (a) tends to its knitting during earnings season; (b) decamps to Sahel or (c) both, simultaneously.

The biggest news on the diplomacy front: Sameh Shoukry’s very busy day in Washington, DC (see Diplomacy + Foreign Trade, below) and the deepening row between Canada and Saudi Arabia (see Speed Round, also below).

The biggest business news of the day: Elon Musk is mulling whether to take Tesla private. “Am considering taking Tesla private at USD 420. Funding secured,” Musk tweeted. “Shareholders could either to sell at 420 or hold shares & go private,” he added in a follow-up tweet. His message followed a report that a Saudi investment fund had taken a nearly 5% stake in Tesla. If he follows through, the move would be the biggest buyout in history, with a valuation of USD 70 bn, according to the Wall Street Journal.

Turkey — the cautionary tale of EMs: At one point in time Turkey was the darling of emerging market investors, with the lionshare of credit given to then prime minister and current President Recep Tayyip Erdogan. The unraveling of the lira, particularly as it reached a record low over the past few days, has exposed just how far Turkey has fallen from grace. The state of the lira, how the Erdogan administration scared off bulls, and the impact this has had on bond yields and equities is the subject of a series of pieces in the Financial Times that is certainly worth checking out. It’s spelled k-a-r-m-a.

Also on our radar this morning:

Also in the FT: The salmon-colored paper has one of the best roundups of advice we’ve seen in a long time for bosses who are struggling to lead growing teams.

You think of eating my lunch, I shoot your dog: We’ve written a couple of times in recent months about big consultancies looking to gobble up business previously handled by ad agencies. Now the Omnicoms of the world are fighting back, getting into corporate consulting by launching or buying-up consulting practices.

We collectively used the world’s entire natural resources budget for 2018 in the first seven months of the year, HSBC says in a note to mark Earth Overshoot Day. The conclusion: Business and government are “not adequately prepared for climate impacts, nor are they using natural resources efficiently,” the bank writes, according to a piece by Business Insider.

The Madbouly Cabinet’s approval of a draft Data Protection Act during its weekly meeting yesterday was the main topic of concern for the talking heads last night. We have all the details on the legislation and other key decisions taken by the Council of Ministers in Speed Round, below.

The legislation is meant to improve data security within Egypt and regulate the cross-border transfer of data (whatever that means), Cabinet Spokesperson Ashraf Sultan told Yahduth fi Masr’s Sherif Amer (watch, runtime: 2:32). The ICT Ministry’s legislative committee head Mohamed Hegazy also recapped some of the main features of the bill on Hona Al Asema (watch, runtime: 9:16), while House Rep. Nedal El Saeed phoned into Masaa DMC to tell Osama Kamal that the House of Representatives will begin its review of the legislation in October (watch, runtime: 4:27).

Trade Minister Amr Nassar issued a decision to repeal a levy on sugar exports that had been imposed by former Minister Tarek Kabil last year, Al Mal reports. Exporters had been required to pay a EGP 3,000 tax per tonne of sugar they exported.

Industry figures are divided on what the move means for the market: Federation of Egyptian Chambers of Commerce head Ahmed El Wakil thinks the move is several months too late, since Egypt has had a surplus of sugar for some time now, which could have been exported earlier. Former head of the Federation of Egyptian Industries’ sugar division Rafat Rozeika, meanwhile, says Egypt imports as much as 1 mn tonnes of sugar to meet local consumption needs, meaning the levy should have remained in place. Repealing the tax may require more imports and could even risk a repeat of the 2016 shortage, he told Hona Al Asema (watch, runtime: 11:25).

Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan’s visit to Cairo yesterday was also a main topic point for Ittihadiya Spokesperson Bassam Rady on Masaa DMC (watch, runtime: 6:46), while Yahduth fi Masr’s Sherif Amer and Al Hayah fi Masr’s Kamal Mady (watch, runtime: 1:44 and runtime: 6:25).

Plans to reduce the number of workdays for state bureaucrats stems from a general dissatisfaction with the level of performance coming out of state bodies, Rep. Abdel Fattah Mohamed said on Masaa DMC, because, you know, MPs really have got it together. Mohamed confirmed that the idea is still under study and noted that Parliament hasn’t been involved in any discussions since it is currently on its summer recess. He did not clarify whether parliament’s sign-off on the final strategy would be required (watch, runtime: 5:22).

Authorities should gradually allow fans to attend football matches again, starting with university students, Rep. Farag Amer told Masaa DMC’s Osama Kamal. Amer argued that tighter security measures inside stadiums will make it possible for fans to return without problems (watch, runtime: 7:42).

Hona Al Asema’s Dina Zahraa held a roundtable discussion on the future of print journalism in a digital era with Press Syndicate head Abdel Mohsen Salama and Dar Al Hilal Publishing House Chairman (watch, runtime: 22:08).

REGULATION WATCH- FRA issues new regs on licensing of microfinance providers, sets minimum capital at EGP 15 mn: The Financial Regulatory Authority (FRA) issued amendments yesterday to the regulations that govern the establishment and licensing of microfinance firms, Youm7 reports. Under new rules, microfinance outfits must have a minimum issued capital of EGP 15 mn and initial paid-in capital that is equal to at least 50% of that amount and which increases gradually over a three-year period. The rules also stipulate that no one person, entity, or group can own more than 49% of a microfinance firm without receiving a non-objection from the FRA.

What about licensing fees? The annual licensing fees that microlenders will have to pay — which have been capped at EGP 100k — will be equivalent to 1% of their paid-in capital and increase gradually as capital rises. The FRA will also be claiming a quarterly tithe of 0.05% of the total funding extended by a firm during the three-month period. The FRA had issued new regulations in May for the licensing of non-banking financial institutions, which set out stipulations on ownership structure and regulatory framework.

CABINET WATCH- The Madbouly Cabinet signed off yesterday on a draft Data Protection Act, which is meant to set the ground rules for the handling and processing of personal information online and otherwise, according to an official statement. The bill, which will be presented to the House of Representatives at the start of the fall legislative term, makes it mandatory for companies to obtain users’ prior approval for data sharing, setting prison terms of at least one year and fines of EGP 100k-1 mn for violations and data breaches. It also includes provision to guarantees users’ right to access their private data at any time. We had previously heard that the new act would also give users the right to take legal action against parties responsible for data breaches and misuses of private information,

Data protection officers with powers of arrest? The law will also establish a data protection unit inside the Information Technology Industry Development Agency (ITIDA), whose members will be appointed by the Justice Minister and given powers of arrest, the statement said. The center will be responsible for implementing the law, as well as setting strategies, policies, and systems for data protection.

Also approved at yesterday’s weekly cabinet meeting:

• A decision allowing the National Telecommunications Regulatory Authority to invest EGP 600 mn in state-owned Silicon Waha;
• A decision to award the military-owned El Nasr Co. For Services & Maintenance (Queen Service) a one-year contract to clean and service the historical sites around the Giza Pyramids.
• The allocation of state-owned land in downtown Alexandria to the Electricity Holding Company to build a transformer station.

Railway Authority to purchase equipment from Austria’s Plasser & Theurer under EUR 6.8 mn contract; will use the gear to to measure health of railway track: Egypt’s Railway Authority signed a EUR 6.8 mn agreement with Austria’s Plasser & Theurer yesterday to purchase the latter’s railway track surveying vehicle, the EM100U. The vehicle uses ultrasonic waves to measure the health of railway tracks and detect flaws, according to a cabinet statement. Transport Minister Hisham Arafat said the equipment is expected to help the government accurately determine weak points in the country’s railway track network, which require immediate attention, adding that he expects the vehicle to complete a full sweep of tracks across the country within a month.

Why is such a small contract getting such big play? Dozens of people were injured when two trains derailed last month, one each in Upper Egypt and Giza. Preliminary findings had suggested that a lack of maintenance on the track was responsible. The government had begun to take steps to overhaul the railway sector earlier this year, after a train collision in Beheira left 12 people dead and 39 others injured. Among the steps was the passage of amendments to the Railway Act that allow the private sector to participate in developing, managing, and operating railway projects.

This comes as we hear that France’s Systra won a EGP 50.2 mn contract to carry out the design work and plans for the extension of the Cairo Metro Line 2. The National Authority for Tunnels rejected the offer submitted by Lebanese consultants Khatib & Alami, which did not meet tender requirements, sources close to the matter tell Al Mal. The list of bidders had also included Egis Rail, Setec, Artelia, and Dar Al-Handasah. The extension of Line 2 to Qalyub is expected to cost EGP 10 bn and comes as part of the government’s plans to upgrade railway services.

Is the government looking to hire the private sector to run retail outlets for state-subsidized goods? The Supply Ministry is just a week away from finalizing the template of a contract that will outline its future partnerships with the private sector on the development and management of state-controlled food retail outlets, ministry spokesman Ahmed Kamal tells Al Mal. 10 privately-owned hypermarket retail chains, including Carrefour, Spinney’s and Metro have already approached the Ministry about the possibility of being contracted to upgrade and operate outlets where subsidized commodities are sold, he adds, refusing to disclose any more detail. Minister Ali El Moselhy had met with executives from various retail chains last week to discuss the framework for their potential partnership, Kamal added. We noted last month that the House of Representatives was looking to amend existing laws on state cooperatives, with the aim of creating one unifying legislation to govern the different types of outlets that sell subsidized commodities.

MOVES- Finance Minister Mohamed Maait appointed Kamal Negm to lead the Customs Authority, Youm7 reports. Negm replaces Amr El Kholy who was appointed as an interim head after ex-boss Gamal Abdel Azim was arrested last month on charges of accepting bribes worth EGP 1 mn in exchange for facilitating the clearance of goods from customs. Negm was the head of the Central Administration of Customs in Damietta.

MOVES- Cisco has appointed Ayman El Gohary as the new general manager for Cisco North, West & Central Africa (NWCA), according to Youm7. El Gohary was named for the new position back in February, according to CISCO’s official website. El Gohary was most recently the general manager for Cisco Egypt, Libya and Sudan.

White taxi drivers turned down a proposal from ride-hailing app Careem to begin discussions about including them in the company’s fleet, Country Planning Director Haitham Nassar said yesterday, Al Mal reports. Cab drivers apparently believe that joining Careem’s fleet would put them at an unfair advantage and force them to bear administrative fees they would not have to pay otherwise, said the head of the White Taxi Association Mahmoud Abdel Hamid. The white cab ride-hailing service through Careem would be priced 25% lower than the company’s main service, Nassar said, however, adding that studies are ongoing to determine which Nile Delta cities to pilot the service in first. The Ride-hailing Apps Act — which was approved by the House of Representatives in May — requires ride-hailing companies to incorporate white taxis into their fleets.

They don’t want to integrate, they want to compete: It is also worth noting that this is the very same White Taxi Association that has not only attempted to snuff out the Ride-hailing Apps Act, but is also readying to launch its own competing ride-hailing app. This is more about competition than anything else.

Foreign Minister Sameh Shoukry had a very busy day yesterday in Washington, meeting with US business leaders, state department officials and US National Security Adviser John Bolton. He sat down with business leaders representing US corporations including, Apache, ExxonMobil, Cargill, Lockheed Martin, and Honeywell. The meeting, which was organized by the US Chamber of Commerce, saw Shoukry invite US industrialists to establish a US Industrial Zone in the Suez Canal Economic Zone, according to a statement from the Foreign Ministry. Shoukry also highlighted that Egypt was interested in non-oil investment from US companies, ministry spokesperson Ahmed Abu Zaid said.

US aid to Egypt was the highlight of Shoukry’s meeting with Bolton, Abu Zaid said. Shoukry stressed to Bolton how crucial US aid, whether military or otherwise, was in Egypt’s fight against terrorism. The aid must be “nurtured and protected,” Shoukry added. The US restored USD 195 mn in military aid last month that it had suspended a year ago on human rights concerns.

Shoukry also gave Bolton the rundown on where Egypt stands in its anti-terrorism fight, with updates on the Armed Forces’ Operation Sinai 2018. Shoukry also discussed setting up 2+2 meetings between Cairo and Washington’s foreign and defense ministers. The latest on Syria, Libya, and Gaza was also on the agenda.

Gaza and Middle East peace process featured in Shoukry’s talks with Assistant to the President and Special Representative for International Negotiations Jason Greenblatt, who briefed Shoukry on talks he has had with regional players ahead of announcing the Trump administration’s peace plan. The pair also discussed restoring aid to Palestinian refugees through the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), according to a Ministry statement.

Also on the diplomacy front, Egypt and Sudan reached a military cooperation agreement which would see them work together on border security and anti-terrorism operations, Xinhua reports. The agreement is the latest in a series of moves to de-escalate tensions between both countries over the Grand Ethiopian Renaissance Dam and trade.

Egypt stands with Saudi in Canada row: Egypt gave its support to Saudi Arabia against “any interference in its internal affairs,” according to a statement from the Foreign Ministry on Tuesday. The ministry said it was concerned at the level of escalation, with ministry spokesperson Ahmed Abu Zaid saying that the events were a result of a number of international actors interfering in the internal affairs of regional nations. He added that Egypt adheres to a strict policy of respecting the sovereignty of other nations.

The story so far: Egypt’s statement mirrored remarks out of the GCC on Monday and came after Saudi Arabia ordered Canada’s ambassador to leave the kingdom and suspended future trade. The row erupted after Canada’s foreign minister urged Riyadh to release women’s rights activists. The move, still front page in the global business press (“Saudi Arabia’s furious attack on Canada shocks western allies,” blares the headline in the Financial Times) potentially risks a USD 13 bn defense contract to sell Canadian-made General Dynamics Corp armored vehicles to KSA.

The UAE again underscored its support for KSA during UAE Defense Minister and Abu Dhabi Crown Prince Mohammed Bin Zayed’s visit to Cairo yesterday. In a joint statement with Ittihadiya, both Bin Zayed and President Abdel Fattah El Sisi declared their rejection of efforts by foreign countries to interfere in the internal affairs of others. Bin Zayed was in town to discuss regional issues.

Canada is looking to its allies, including the UAE and the UK, to help de-escalate tensions with Saudi Arabia, a source with knowledge of the matter tells Reuters. “The key is to work with allies and friends in the region to cool things down, which can happen quickly,” said the source.

One frenemy down south is not moving a finger: The US will not help Canada with its tiff with Saudi. “Both sides need to diplomatically resolve this together. We can’t do it for them; they need to resolve it together,” U.S. State Department spokeswoman Heather Nauert told a briefing. America could, in fact, be making things worse for Canada, CNBC argues.

Other US allies are holding their breath on another front after US President Donald Trump warned that any company doing business will be barred from the United States, Reuters reports. The statements came as the US re-imposed sanctions it had lifted after the signing of the 2015 Iran Nuclear Pact.

EFIA to meet with FinMin some time next week to discuss Customs Act: The Egyptian Federation of Investors Associations (EFIA) will meet with Finance Minister Mohamed Maait next week to discuss their remarks on the latest draft of the Customs Act, deputy EFIA head Mohamed El Morshedy said yesterday. The federation’s reservations on the act are similar to those the Federation of Egyptian Industries’ had come up with and was expected to discuss with the ministry this week. Among their concerns are that penalties for customs evasion are too severe.

The Emirates NBD purchasing managers’ index for Egypt will be released on Sunday, 12 August, covering July 2018.

The central bank will next consider interest rates on Thursday, 16 August.

Orange Egypt’s board of directors is meeting on 27 August to look into the company’s proposal for a voluntary delisting.

A delegation of 60 unnamed US companies is set to visit Egypt in October to explore potential investments across a variety of sectors. A Japanese trade delegation is also due to visit the new capital and Suez Canal by the end 2018.

Energy plays haves slipped out of favour with emerging market equity funds, Steve Johnson writes for the Financial Times, “in what appears to be a structural trend, rather than a cyclical one driven by weak oil prices.” A new study by Copley Fund Research shows that “12% of EM equity funds now hold no oil stocks … This is a marked change from the period up to 2012, when virtually every fund held at least one oil and gas company stock.” In the past, oil stocks had fallen in and out of demand based on movements in global prices. Despite the rally in oil prices over the last several months, however, “there are quite a few funds who are happy to hold nothing,” says Copley founder Steven Holden.

So what’s new this time? Tech plays are winning new allocations, but perhaps a bigger issue is “the seemingly unstoppable rise of mantras such as “ESG”, which involves taking environmental, social and corporate governance issues into account in an investment decision.” This makes things more difficult for oil companies, particularly in emerging markets — some of which are considered the world’s “biggest contributors to global warming, and therefore, climate change,” Mirabaud Asset Management’s Daniel Tubbs says, explaining that as part of a firm’s “fiduciary duty” to clients, “we are looking for long-term exposure to sustainability trends.”

Residents in an Alexandria neighborhood claim they’re developing health problems because they are “directly in the path” of a nearby cement plant’s emissions. A photo essay carried by the New York Times depicts the health hazards endured by the residents of Wadi El Qamar in western Alexandria as a result of their proximity to Titan Cement’s Alexandria Portland Cement Company. The photo essay is by Egyptian photographer Mohamed Mahdy and claims that residents “have repeatedly filed complaints to the Ministry of Environment and taken legal steps against the factory over its harmful emissions. But rather than address the issue, the plant urged the community members, most of whom are impoverished, to relocate.”

Topping coverage of Egypt in the foreign press this morning are repeated wire pickups of Egypt’s debt growing to USD 88.2 bn in 3Q2017-18.

As David Kirkpatrick’s book on the upheavals in Egypt between 2011 and 2013 hit the stands yesterday, and reviews and commentary have begun flooding the foreign press. NPR’s Terry Gross had a lengthy chat with Kirkpatrick about the book, focusing specifically on the former New York Times Cairo bureau chief’s analysis of how successive US administrations have “contributed to chaos in Egypt.” Kirkpatrick is particularly critical of the Obama administration for how it handled the ouster of former President Mohamed Morsi. According to Kirkpatrick, there was a large amount of “discord” within the administration’s top brass on the issue, which culminated in the White House “watching Arab democracy fall.”

In a review for the NYT, veteran Cairo hand Steve Negus writes of Kirkpatrick’s “engrossing account” of the events from the 2011 revolution until the 2013 uprising that brought President Abdel Fattah El Sisi to power. “‘Into the Hands of the Soldiers’ is a journalist’s eye view, not a comprehensive history. Kirkpatrick ignores or skips quickly through key grievances of the anti-Morsi movement, both the contrived … and the genuine,” Negus says, but is still an exceptional work: “Kirkpatrick gives an unmatched blow-by-blow of the Obama administration’s Egypt diplomacy” and draws on “extensive interviews with Egyptian officials and with Morsi’s aides.”

Judge for yourself: You can order your own copy of the book here.

How slow a news day was it? Reuters is running a story on a snake charmer in Sharm El Sheikh.

Giving foreign residents Egyptian citizenship in exchange for money is an economic policy and should be discussed as such, Abdel Moneim Salama writes for Al Masry Al Youm. Many Egyptian nationals decried the recently-passed law allowing foreign residents to obtain citizenship in exchange for a EGP 7 mn bank deposit as an infringement on the Egyptian cultural identity, but few interpreted it correctly as part of the government’s overall efforts to add to the state’s revenues, he says.

Today’s infrastructure investment can help drive economic growth for millennia — look no further than the Roman Empire’s legacy in Europe: A group of Danish economists have put forth a theory that infrastructural investment is one of the main drivers of economic growth and development, which could explain why contemporary Europe is as prosperous and developed as it is, Christopher Ingraham writes for the Washington Post. “They demonstrate that the density of ancient Roman roads at a given point in Europe strongly correlates with present-day prosperity, as measured by modern-day road density, population density and even satellite imagery of nighttime lighting.” According to the economists, the massive road network built by the Roman Empire laid the groundwork for prosperity by creating trade routes and allowing for greater levels of economic activity today.

The Romans built roads in North Africa, too, but they were not maintained as well as Europe’s: The MENA region apparently turned its back on wheeled transport sometime between the 5th and 10th centuries, meaning Roman roads “weren’t maintained the same way they were in Europe, where cart-based transit remained dominant. ‘The implication of these developments is that since ancient roads fall into disrepair in the MENA region, to a much greater extent than in Europe, one should expect to see much less persistence in infrastructure density.”

Egypt receives USD 350 mn from BADEA to support private sector development: Egypt recently received a USD 350 mn loan from the Arab Bank for Economic Development in Africa (BADEA) to support private sector growth, Investment Minister Sahar Nasr said yesterday. The loan primarily targets sectors like banking and finance, with an eye towards encouraging African investments and boosting exports. No further details were provided.

A number of unnamed Egyptian investors plan to break ground in December on a new industrial complex specializing in the production of home- and kitchenware, with initial investments of around EGP 300-400 mn, Cairo Chamber of Commerce’s Fathy El Tahawy tells Amwal Al Ghad. The 80k sqm complex in Minya will host five factories. Construction should be complete within 8-10 months’ time.

Cypriot airline Cobalt Air is planning to begin operating four weekly flights from Cyprus to Cairo in November, head of the airline’s local agent Elhamy El Zayat tells Al Shorouk. The route is pending approval from the Civil Aviation Ministry, according to El Zayat.

CI Capital has a number of transactions in its pipeline in sectors including tourism, real estate, manufacturing, and pharma, Managing Director Tarek Tantawy said yesterday. The company expects to complete the listing of a pharma manufacturer on the EGX in 3Q2018, according to Tantawy, who didn’t disclose the name. CI Capital is also participating with other international investment banks in the listing of an unnamed European company on a European stock exchange, he added without elaborating.

Banque Misr Chairman Mohamed El Etreby spoke to Xinhua about plans to open an office in Beijing, after the bank launched an office in Guangzhou last year.

The Supreme Media Council issued a decision yesterday requiring television networks to request the council’s sign-off on airtime purchase agreements, Al Shorouk reports. Networks will be required to present documents ensuring that the content that will be broadcasted during the purchased airtime will not incite violence or spread rumors and otherwise adheres to media standards. The council’s approval is now required before any such agreements are signed.

Egypt’s national U18 women’s’ handball team lost their first 2018 youth world championship game against Chile, suffering a 23:12 defeat in what started out as a slow game, according to the tournament’s official website. The youth tournament kicked off yesterday in Poland and will run until 19 August. The team will still face Croatia, Denmark, Hungary, and Sweden in upcoming group stage games. You can view the groups and schedules here.

An ancient Islamic manuscript lost by Egypt in the 1970s was retrieved after being spotted at a London auction. The ُEgyptian National Library reclaimed the manuscript, “the first known Islamic study of historical theory,” last month, according to the Associated Press.

Egyptian-American Abdul El Sayed could become the first-ever Muslim American US state governor, if he secures a victory in the gubernatorial race in Michigan in November, according to Al Arabiya. The 33-year-old democrat was born in Michigan to Egyptian parents and had formerly been the youngest Health Director in the history of Detroit. Al Arabiya describes him as “unapologetically progressive,” and notes that he has been endorsed by US Senator Bernie Sanders, who campaigned alongside him in “in two boisterous rallies in the state.”