Will Ford Motor Company assemble in Egypt? Minister under fire for Upper Egypt ‘slur’. El-Sisi gives second fireside chat. Mortgages in the spotlight. EGAS still waiting for replies to second FSRU tender. Jetpacks over Dubai. USD 30 bn coal imports?

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WHAT WE’RE TRACKING TODAY

The MENASOL 2015, Middle East & North Africa Solar Conference and Expo will begin today in Dubai and run until Thursday. Heads of all major solar players and renewable energy public officials from Egypt, the UAE, Morocco and others will be in attendance. View the official event page here for more details.

WHAT WE’RE TRACKING THIS WEEK

The EBRD will hold its Annual Meeting and Business Forum on Thursday and Friday. Dr. Mohammad Omran, chairman of the EGX, is set to be a speaker at the event, according to a statement from the bourse.

Verdicts are expected on Saturday in two separate trials of Mohamed Morsi: one for espionage and the other for his escape from prison in 2011.

Also on Saturday: TEDxCairo: Continuum at the AUC’s New Cairo Campus. View the event page here.

LAST NIGHT’S TALK SHOWS

President Abdel Fattah Al Sisi’s second fireside chat was covered live on all television channels last night. Most talk show presenters devoted their programs to a line-by line analysis of the President’s speech. The entirety of the President’s address may be viewed here: (Watch in Arabic, running time: 1 hr, 6 min)

Lamees El Hadidy’s take on the speech was that the President intentionally simplified his messages to make sure it resonated with the ordinary Egyptian.

“President Al Sisi did not speak about politics or the elections, but rather chose to directly address the concerns of the man on the street. He was essentially saying, ‘I know that you are worried, I want to reassure you that we are fine and that we are on the right path. Here is what we are doing regarding terrorism, power outages, corruption, the Suez Canal, the development of Sinai and Virus C,” El Hadidy said.

“It is significant to note that the topic of terrorism did not dominate the speech. The President only spoke for five or six minutes on terrorism in a speech that lasted a little over an hour,” added El Hadidy.

El Hadidy’s one criticism of the President’s speech was that it started an hour later than scheduled.

“I’m not sure if this is the fault of Egyptian television or what, but the Egyptian people had an appointment with the President at 7 o’clock, they were waiting for him to address them at that time, and that should be respected. The editing of the speech was also mediocre. I’m talking about basic competence here. There were some very amateurish mistakes like repeated segments. This is the President of Egypt, and his speech should not have had editing mistakes. Please take things as seriously as he does.”

Most presenters (in varying degrees) felt that the current government is incapable of executing on El Sisi’s long-term vision for Egypt. Youssef El Housseiny led the pack with his harsh critique of the Mahlab government, a recurring theme on his show.

“The President presented some great ideas but who is going to implement his vision. He can’t do everything himself. We need a strong government that is capable of keeping pace with this man. A government that has the same will and the same drive to succeed,” said El Houssieny.

According to Amr Adeeb, the recurring theme throughout the President’s speech was “not only.” “He not only shared with us how he is tackling the issues at hand, he also told us about the long term plan for the country. He is “not only” thinking about quick fixes, he is planning for the future. He tried to drive home the message that we are “not only” looking to solve immediate problems but also thinking of sustainable long-term solutions. I think he’s the first President that used the words “I dream.” He has addressed all the issues that people are worried about. It was a recurring theme. His hand is definitely on the pulse of the nation.

Two takeaway points from the President’s speech is that he has set the date of 6 August for the inauguration of the Suez Canal axis, as well as calling for one mn doses of Hepatitis C drugs from drug manufacturers at reduced prices, in addition to the current deal in place with Gilead.

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SPEED ROUND

Ford Motor Company is studying the possibility of establishing an assembly plant in Egypt, reports Al Ahram. Several high-ranking government officials, including Prime Minister Ibrahim Mahlab as well as the finance and irrigation ministers, met with the head of Ford Motor Company’s MENA operations on Monday to discuss the various economic incentives and advantages that would be afforded to the American automaker by establishing an assembly plant in Egypt. Specifically, Prime Minister Mahlab explained how Egypt’s membership in COMESA would allow Ford to increase its exports to countries in eastern and southern Africa.

The CBE’s initiative to extend EGP 10 bn to be used in mortgage financing is likely to be used up within 12 months, according to CBE assistant sub governor Tarek Fayed, who was speaking at the according to comments made at the Partnership for Development conference which took place on Tuesday. To expand access to the programme, Fayed said, the CBE reduced mortgage interest rates to 7% to lower income borrowers and 8% to middle income ones. However, Fayed also believes that the size of the mortgage finance market is not compatible with the size of the much larger real estate market. The investment minister Ashraf Salman echoed a similar sentiment, calling the volume of mortgage financing in the market “depressing.” Salman says unit registration remains the biggest impediment with the head of the government’s real estate fund agreeing tacitly. She said the fund has already sent PM Mahlab a memo to begin including unregistered residential units. Rooya Group’s head suggested that enacting laws that allow for leasing would accelerate the sector’s development. The basic problem for banks remains the absence of an enforceable repossession mechanism, leaving the bank without the ability to ensure its rights are preserved if borrowers do not make the mortgage payments. Mohamed El Hoshy, President of the Egyptian Credit Bureau “iScore”, believes that Egypt’s mortgage finance has the potential to reach EGP 50 bn, a sharp rise from its current size of EGP 5 bn. According to Hoshy, Egypt’s mortgage finance market is worth less than 1% of the country’s GDP. Conversely, the mortgage finance markets of other emerging economies is worth around 8% of GDP.

Minister under fire for Upper Egypt comments: The Upper Egypt Youth Organization has filed a formal complaint with the prosecutor general against Minister of Urban Development Laila Iskander for her remarks she made about the Upper Egypt farmers migrating to the capital being the primary cause of growth informal settlements around Cairo. The controversy comes just one day after the nation’s justice minister resigned under pressure after making classist comments about the inability of a garbage collector’s son to become a judge. Commentary: While rural migration was the main cause of settlement from the end of the Second World War through the 1980s, growth in informal settlements since that point has come from second and now third generation residents, according to the research of David Sims.

Tracy London and Tom Swarbrick of Bracewell & Giuliani LLP published on Tuesday a follow-up on the MESIA renewable energy conference which took place in Cairo at the end of April. In addition to currency risk, as noted by The National’s LeAnn Graves last month, the report identifies three other areas of concern highlighted by developers at the conference:

• Government Guarantee
• Change in Law
• Right to appeal in the power purchase agreement

Egypt has neither received responses to a tender for a second FSRU nor has it found a suitable port for it, Rachel Williamson writes for Interfax. EGAS Chairman Khaled Abdel Badie “had expected to receive a reply within seven days from one or more of the eight international companies EGAS had approached. But a week later, neither Egypt’s Ministry of Petroleum nor EGAS sources could confirm that a response had been received,” Williamson notes. The problems are compounded by the Ain Sokhna Port being too congested for a second terminal, so EGAS is now looking at the possibility to convert the Al Adabiya Port “within a three-to-six-month timeframe to allow an FSRU to dock.” Ultimately, Williamson argues, once the domestic gas shortage is brought under control, “BG Group – the main user of the Idku plant… will be able to start exporting LNG again.”

The executive regulations of the new investment law will be publicly available in three weeks,investment minister Ashraf Salman said. His comments came during the first Egypt Coal Conference and did not include any further details.

Setting up Egypt’s coal infrastructure will require an EGP 90 bn investment, Waleed Abu Raya, the Chairman of RGS Egypt, told Al Mal. Infrastructure investments needed in order to receive and transport coal imports from ports will require the bulk of investments due to the long waiting time ships have to endure currently.

GB Auto reports 20% year-on-year rise in revenues to EGP 3.2 bn, profits up 8.5% to EGP 52 mn in 1Q15. The results came as “solid performance of divisions in our home market somewhat offset by the devaluation of the Egyptian pound as well as increased risk and challenges in our expansion markets,” said CEO Raouf Ghabbour. “That said, this is nothing we have not encountered before: When Egypt was in crisis we continued investing and expand­ing, effectively position­ing ourselves to take the lead in today’s recover­ing market. Likewise, we intend to continue investing in both our expan­sion markets and our product portfolio in a capital efficient way that will see us go up the value chain to enhance our business profitability.” Normalized to exclude foreign exchange charges, net income in 1Q15 would have stood at EGP 109.9 mn, a 67% increase over the normalized bottom line one year ago. (Read the earnings release in pdf)

PAYFORT has released its 2015 State of the Payments report on online payments in the Arab World. People aged 26-35 are the largest utilizers of ecommerce in the Arab World, but the region continues to favor cash on delivery options to credit or debit cards – especially in Egypt where 72% of online consumers pay on delivery. Ecommerce, currently a USD 7 bn market, is the fastest growing sector in the report and PAYFORT expects it to almost double in size and be as big as airlines by 2020. You can check out the report’spress release here or better, you can click through the wonderfully interactive report itself.

Misr for Central Clearing, Depository and Registry has made a number of announcements yesterday on the back of the organization’s General Assembly, as reported by Al Mal. The first has been that it plans to amend the executive regulations governing EGX-related taxes to allow the Central Clearing to collect taxes on EGX transactions. The move comes as a number of investors reportedly failed to pay taxes to the Income Tax Authority. Longtime Central Clearing chief Mohamed Abdel Salam also announced that the organization is looking into amending the EGX registration fees, as the rates in place now are too high for companies with low capitalization. General assembly members have begun voting for their board, which is composed of three representatives from brokerage companies, three from depository and two experienced members from the sector. (Read in Arabic)
Sweet subsidy for sugar industry: EGP 750 mn has been granted to the sugar production sector to aid the ailing industry, according to Mohamed Abdel Fattah, the head of the budget committee within the Ministry of Finance (Read in Arabic)

As seems to happen every time there is a tech bubble, AOL is being sold, this time to Verizon in a USD 4.4 bn deal that values the one-time tech and media giant at USD 50 per share. The transaction will be completed in the summer through a tender offer followed by a merger, CNBC reported.

***
A MESSAGE FROM PHAROS HOLDING

The Future May Not Be So Sweet for Delta Sugar
Pharos Research reiterated its call for Delta Sugar Company (DSC) stocks in a recent publication, recommending investors sell their stakes after the company sustained losses of EGP 1.1 mn in the first quarter of 2015. This recommendation is largely based on a bleak outlook for international sugar prices as well as anticipated cost-driven margin erosion at DSC—due to the surging costs of energy and raw materials. Moreover, the company’s unwillingness to compromise on its cash dividend policy despite the absence of funds—which saw them borrow EGP 221.8 mn in 1Q15—raises concerns about Delta Sugar’s financial position.

Echoing Pharos’ views, Egypt’s Central Audit Agency issued a separate report shortly after expressing similar concerns.

For more details click here.
***

WORTH READING

The New Yorker profiled Marc Andreessen, cofounder of the top-tier venture capitalist firm Andreessen Horowitz, in a lengthy (13,700 word+) but excellent piece, where he is quoted as saying “We’re not funding Mother Teresa. We’re funding imperial, will-to-power people who want to crush their competition. Companies can only have a big impact on the world if they get big” and exposes another side by saying “we’re imperfect people pursuing perfect ideas, and there’s tremendous frustration in the gap… when you want to impact the world you need one hundred people, then one thousand, then ten thousand—and people have all these people issues.”

WORTH WATCHING

Yves Rossy and Vince Reffet fly jetpacks over Dubai’s desert and cityscape in 4k resolution. Their flyover of the city starts at the 7-minute mark. (Watch, running time: 11:52)

Cairo Governor Galal al-Saeed reveals that a leader of the “Downtown T-shirt vendor Mafia” assisted with the removal of street vendors from the area. (Watch in Arabic, running time: 2:20)

EGYPT IN THE NEWS

David Kirkpatrick of the New York Times, David Hearst of Qatari-funded Ikhwan platform Middle East Eye writing for the Huffington Post, and the hivemind itself Al Jazeera link arms to joyously skip down the well-trodden path of Egypt-bashing. Political Islamists hope in vain that the latest findings of J. P. French Associates (work commissioned by the Ikhwan’s lawyers in the UK — a cottage industry unto itself) will finally make someone, somewhere, care. J.P. French have released statements to the British police saying there is “moderately strong” evidence supporting the authenticity of the alleged Sisileaks.

The latest findings were first commented on by Kirkpatrick on Tuesday in the New York Times, and were picked up by our good friends Huffington Post and Al Jazeera. Kirkpatrick deals with the story professionally, while Hearst scrambles to a new low by presenting the following unassailable hearsay: “Some highly placed figures in the Egyptian military establishment have expressed alarm … I have been told that one of them reportedly said.”

All of this coverage begs the question: Who’s the intended audience? It’s not the news-consuming public in the West, who neither know nor care to know anything about Egypt beyond the fact that there are pyramids and camels. It isn’t the Egyptian people, whose reaction to the leaks has been resounding silence. It certainly isn’t Western politicians. Through the process of elimination, one is left with the sad conclusion that these articles are written to be consumed solely by other people writing the same article — more or less a very long email thread.

For an antidote: Ahmed Feteha in Bloomberg writes: Sadat City a cautionary tale as Egypt leader plans new Capital.

DIPLOMACY

Egypt on Monday demanded the resignation of the Finnish coordinator of a U.N. initiative that would see the Middle East become a nuclear-free zone. “The head of Egypt’s delegation, Assistant Foreign Minister Hashim Badr, rejected any suggestion that Cairo was a spoiler and insisted that he wanted to move the process forward, not kill it.” (Read)

Salah Helal, the agriculture minister, met with Norway’s ambassador to Egypt, Tor Wennesland, to discuss cooperation in the field of agriculture between the two countries, Al Mal reported.

Saudi Arabia wants to arm Jabhat al Nusra in Syria, rejects Egyptian position on political solution in Syria -Haaretz: Haaretz notes that the Saudis reject the Egyptian position on the resolution of the Syrian civil war. “Saudi Arabia and the Gulf states are also demanding the establishment of a buffer zone in northern Syria, and the funding and arming of all the militias (with the exception of the Islamic State), including Jabhat al Nusra, which is allied to Al-Qaida, on condition that it renounces its loyalty to the latter. In this way, Saudi Arabia and its neighbors are rejecting the Egyptian position, to the effect that Assad must be involved in resolving the unrest in his country, and also criticizing the hesitancy of Washington, which has reduced its assistance to the militias.” (Read in Haaretz)

UNESCO Director-General Irina Bokova arrived in Cairo on Tuesday for a two-day visit where she will meet with President El Sisi along with other officials. “Bokova will launch the ‘#Unite4Heritage’ campaign in Egypt in cooperation with the Egyptian Ministry of Antiquities aiming at mobilising the international, regional and local efforts to protect and preserve threatened heritage and to stand against the sectarian propaganda campaigns via different social networks and Internet”, according to a statement reported on by Ahram Online.

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Smart cards to end fuel black market, Total Egypt believes
Al Bawaba | 11 May 2015
Fuel smart cards will end the black market, the head of communications at Total Egypt believes. Total aims to inaugurate ten new gasoline stations this year and will open two new ones this month. Total Egypt now controls 237 gasoline stations across the country after acquiring the downstream operations of Shell and Caltex. The company said its employees are trained and prepared to use the smart cards once the system is implemented. (Read in Arabic)

Finance ministry to revise feed-in-tariff agreements
Al Borsa | 11 May 2015
The electricity ministry sent the feed-in-tariff agreement template to the finance ministry to revise and assess it before having it as a signatory on the contracts, Al Borsa reported. The finance ministry is expected to issue letters of credit for the renewable energy projects “within days.” It is also expected that the finance ministry will provide financial guarantees to the Egyptian Electricity Transport Company to alleviate any concerns investors might have. (Read in Arabic)

USD 30 bn in coal-related investments over five years, Salman expects
Amwal Al Ghad | 12 May 2015
Up to USD 30 bn are expected in coal related investments over the next five years, according to investment minister Ashraf Salman. The minister added that the introduction of coal will contribute to the development of Egypt’s energy sector and enable the government’s reaching of its targeted energy mix. Salman said coal, which is set to be used in heavy industry as well as electricity generation, will provide 8GW of electricity out of a total of 30GW within the next ten years. (Read in Arabic)

OIL & GAS

Oil sector is owed EGP 180 bn from the government
Al Mal | 11 May 2015
The oil sector is owed EGP 180 bn from the government, Tarek El Molla, the head of EGPC told Al Mal. EGP 100 bn are due from the ministries of electricity and finance alone, he added. El Molla said Egypt aims to increase its average daily production of crude to 700 thousand bbl per day from the current rate of 690,000. To facilitate that, EGPC is revising its E&P agreement template to attract more investments by IOCs. El Molla gave an example of EGAS’ willingness to amend some the contracts already signed to account for cost increases and sustain production rates. (Read in Arabic)

Total signs deal with Nissan Auto Egypt to remain their exclusive oil supplier
Al Borsa | 12 May 2015
Total Egypt has signed the previously announced agreement with Auto Egypt, Nissan’s dealer, to remain the brand’s exclusive car oil supplier for the next five years. The agreement includes having Total supply the Nissan vehicles with all the need oils, including from its Quartz line, and having Auto Egypt source all of its products for its shops and dealerships from Total Egypt. The first agreement between the two companies was signed in 2011. (Read in Arabic)

Comparative prices of fuel for the region
Al Mal | 12 May 2015
Egypt ranks seventh in the Arab world in terms of regional retail heavy fuel prices which reached USD 0.36 per liter. Leading the list is oil-starved Jordan whose prices reached USD 1.2 per liter, followed by Tunisia at USD 0.82 per liter and the war-torn nations of Syria and Yemen, whose prices amounted to USD 0.72 and USD 0.58 per liter respectively. Countries which heavily subsidize retail fuel have naturally occupied the bottom of the list. These include Algeria (USD 0.26 per liter), Kuwait (USD 0.2 per liter), and Saudi Arabia (USD 0.12 per liter). (Read in Arabic)

MANUFACTURING

Cabinet approves industrial land pricing changes, IDA says
Al Borsa | 11 May 2015
The cabinet approved amendments regarding the pricing of and payment for land allocated for industrial purposes, the Industrial Development Authority (IDA) said. Investors will be required to pay for 25% of the land’s value on signing with the rest payable over five years. The amendments will allow for two years to complete all construction operations. Having the pay for the land in full during three years was an impediment to development, the IDA said. (Read in Arabic)

Sidpec receives offers to finance ethylene production plant
Al Mal | 12 May 2015
Sidi Kerir Petrochemicals (Sidpec) has been receiving offers from a number of domestic banks and financial institutes to fund a EGP 600 mn ethylene production facility. According to Sidpec’s chairman, Ahmed Helmy, these banks have requested a detailed feasibility study be conducted by the company, which plans to build the facility in partnership with the United Gas Derivatives Company. The facility is expected to produce anywhere between 150-200 ktons per annum of ethylene. (Read in Arabic)

REAL ESTATE & HOUSING

70,000 social housing project homes will be offered under the new real estate financing mechanism
Al Borsa | 12 May 2015
The New Urban Communities Authority (NUCA) is readying 70,000 housing units as part of the Social Housing Project targeting low income families. These will be offered under the new real estate financing mechanism, said Khaled Abbas, head of NUCA. He praised the new mechanism adding that it will prove to have a positive long-term effect, as it allows those with limited means to be homeowners. (Read in Arabic)

TELECOMS & ICT

NTRA assessing amending ADSL contracts to improve service provision
Al Borsa | 11 May 2015
The NTRA will amend the contracts for ADSL providers to improve the service provision. The amendments proposed include allowed ISPs to rent their infrastructure from TE along with the telecom operators once they obtain the required licence. NTRA will also reserve the right to cancel contracts signed with ISPs in cases where the service quality drops consistently. (Read in Arabic)

BANKING & FINANCE

Finance ministry allocates EGP 898.6 mn to government entities
Al Borsa | 12 May 2015
EGP 898.6 mn were allocated to support initiatives by the trade, supplies, and health ministries from the finance ministry. The funds allocated also included EGP 24 mn for the Egyptian Radio and Television Union to repay part of its debts and improve Maspero’s security. EGP 400 mn were directed towards subsidizing the Egyptian Sugar and Integrated Industries Company’s (ESIIC) purchases of sugar cane from farmers, bringing the total ESIIC was allocated this fiscal year to EGP 750 mn. (Read in Arabic)

OTHER BUSINESS NEWS OF NOTE

Egypt Post to engage in EGP 45 mn marketing campaign
Al Mal | 12 May 2015
Egypt Post signed an EGP 45 mn marketing agreement with Al Ahram advertising agency to celebrate its 150th anniversary. The campaign will include advertising on TV, radio, and outdoors across Egypt and will last until September. The marketing campaign aims to attract banking clients to Egypt Post’s services as well as to inform Egyptians about the historic and cultural significance of Egypt Post. Egypt Post ended FY 2013/14 in the black for the first time in ten years with a surplus of EGP 216 mn. (Read in Arabic)

Mahlab to announce govt accomplishments on 30 June anniversary
Al Borsa | 12 May 2015
Mahlab plans to announce the government’s accomplishment on 30 June, according to statements made by the PM in an interview with Jeune Afrique magazine during his visit to France. In the interview he tallied some of these accomplishments pointing to regulatory reform and hastening of infrastructure and national projects. (Read in Arabic)

REGIONAL

USD 50 bn in resources illegally siphoned from Africa
Al Mal | 12 May 2015
Christina Duarte, Cape Verde’s finance minister and a leading candidate for the leadership of the African Development Bank, warned of the long term consequences of asset flight which are costing the African continent around USD 50 bn per annum. Duarte, who successfully spearheaded her country’s economic reforms, called on African governments and her continental counterparts to adopt a stringent policy of institutional and governance reform to tackle corruption, the main cause of asset flight. (Read in Arabic)

ON YOUR WAY OUT

Bassem Youssef will host the 2015 International Emmy Awards on 23 November, according to the AP.

A gas pipeline broke in Ain Shams at 4 am on Tuesday, causing a leakage, Al Mal reported. Authorities cordoned off the area and Town Gas began the repairs process while providing the area’s residents with an alternative supply of natural gas.

The Ministry of Finance granted Egyptian Radio and Television Union (ERTU) EGP 24 mn to help Media Production City enhance its security after recent attacks on the production facility’s electricity pylons. (Read in Arabic)

BY THE NUMBERS

USD CBE auction (Tuesday, 12 May): 7.5301 (unchanged since Monday, 02 Feb)
USD parallel market (Tuesday, 12 May): 7.68 (unchanged from Saturday, 09 May)

EGX30 (Tuesday): 8,691.85 (flat)
Turnover: EGP 325.0 mn (42% below the 90-day average)

WTI: USD 61.24 (+0.81%)
Brent: USD 67.16 (+0.45%)

TASI: 9,627.4 (+0.5%)
ADX: 4,594.2 (+0.1%)
DFM: 4,056.3 (-0.4%)
KSE Weighted Index: 432.1 (+0.2%)
QE: 12,250.2 (-0.2%)
MSM: 6,322.6 (+0.1%)