A new pensions pay-in rate is coming

Good morning and happy hump day, everyone. We’re still barely halfway through the week, but we’re getting there. And we’re exactly two weeks away from the 23 July national holiday. Revolution Day will fall on a Tuesday, making a weekend bridge unlikely, but at least we’ll get a mid-week break.

Expect a busy few days ahead on the legislative front as our representatives race to cross the I’s and dot the T’s on outstanding legislation before heading en masse to Sahel by the end of the week for their summer recess.

The NGOs Act is on today’s agenda: The House Social Solidarity Committee is scheduled to continue today its discussion of the proposed new NGOs Act, which would replace the controversial 2017 NGO law, reports Ahram Online. If all goes according to plan, the law should be passed on Wednesday or Thursday, committee head Abdel-Hadi Al-Qasabi said. The NGO law passed in 2017 placed sharp restrictions on civil society and was roundly criticized by NGOs and the global press. As a result, President Abdel Fattah El Sisi directed the government to amend the legislation during last year’s World Youth Forum.

Also coming up this week: Inflation figures are set to be released, and the central bank’s monetary policy committee meets on Thursday to review key interest rates. All nine economists we polled expect the CBE to leave rates on hold.

An UberX ride will now cost you EGP 2.70 / km, up from EGP 2.55, while the base fare has been set at EGP 7.25, according to a release. The price of a premium UberSELECT ride was raised to EGP 3.95 / km from EGP 3.50, and the based fare is now at EGP 12. If you hop on an Uber Scooter, expect to pay EGP 1.48 / km on top of a EGP 3.50 base fare. The fare adjustment comes after the government raised fuel prices between 16% and 30% earlier this week as part of the latest round of subsidy cuts.

Gold’s Gym in Giza (kind of) sank into the Nile earlier this week after the boat housing the gym partially collapsed (watch, runtime: 00:38). An MP has called for an investigation to hold whoever responsible accountable, Egypt Independent reports.

Afcon’s round of 16 wrapped up yesterday with Ivory Coast delivering a 1-0 win over Mali and our Tunisian neighbors managing to edge out Ghana in a penalty shootout. The quarter finalists are Senegal, Benin, Nigeria, South Africa, Ivory Coast, Algeria, Madagascar, and Tunisia. The quarter finals will kick off tomorrow at 6 pm CLT. For the full list of upcoming games, click / tap here.

The Pharaohs need to become more like the army -former coach: Farouk Gaafar, who managed Egypt’s national team in 1996-1997, has called for a military officer to take charge of the Egyptian Football Association (EFA), Reuters reports. “This timing needs discipline that will be found only in the army,” he said on Sunday, adding that someone with “an iron fist” needed to be put in charge of the country’s football governing body.

JPMorgan is bullish on global stocks: Global equity prices will rise by up to 15% over the coming 12 months, equity strategists at JPMorgan predict. “While the consensus view is that multiples can only go lower, we think there is a potential for the market to start to price in that the US Federal Reserve will end up too dovish for the remainder of the current cycle,” they wrote, according to the FT.

But Morgan Stanley doesn’t agree: Morgan Stanley has reduced its global equities allocation to five-year lows and changed its investment recommendation to underweight (meaning that investors should reduce their holdings). Bank strategists wrote in a note that profit forecasts are unrealistically high as global manufacturing indicators continue to flash red. “We see a market too sanguine about what lower bond yields may be suggesting — a worsening growth outlook,” they wrote, according to Bloomberg. “Continued deterioration in global PMIs suggests a macro environment with plenty of downside risks.”

EM bonds are better positioned for an equity sell-off: The bank has increased allocations of emerging-market and Japanese government bonds in anticipation of a market downturn. “Emerging market fixed income won’t be immune in a larger equity sell-off, but we think it will do better,” the bank wrote in a note.

Communal workspace app WeWork is looking to raise as much as USD 4 bn in debt ahead of an IPO in an attempt to bolster investor confidence in the loss-making startup’s financial sustainability, a source familiar with the matter said, according to Reuters. “The potential debt offering underscores the extent to which the disappointing public market debuts for Uber Technologies Inc and Lyft Inc prompted other loss-making startups with lofty valuations looking to go public to reassess their plans.”

Surprise — Erdogan’s decision to fire Turkey’s central bank governor did the lira dirty: The Turkish lira dropped 1.8% against the greenback and the country’s assets came under pressure after President Tayyip Erdogan decided to fire the central bank governor, Bloomberg reports. All things considered, “the fallout has been relatively contained,” thanks to otherwise OK fundamentals and a favorable climate across EMs.

Turkey is also stirring up trouble in the Mediterranean again with a new drilling operation for natural gas in internationally recognized Cypriot waters. The EU’s foreign policy branch said in a statement yesterday that the plan is “of grave concern” and “a further unacceptable escalation which violates the sovereignty of Cyprus,” Reuters reports. Ankara had announced in May its plans to start its first drilling operations after the Cypriot government stepped up cooperation on hydrocarbons with Egypt and Greece.

Iran has officially enriched uranium beyond the purity limits set out in the 2015 nuclear agreement, the International Atomic Energy Agency (IAEA) confirmed yesterday, according to Reuters. Tehran is believed to have reached a 4.5% purity level, which is above the 3.67% threshold allowed under the agreement, and is now threatening to reactivate centrifuges and reach a 20% purity level. Iran insists that the ramping-up of uranium enrichment would still be for peaceful purposes, and would not be used to build a nuclear weapon.

This all helped keep oil prices steady yesterday, “as tensions over Iran’s nuclear program countered concerns about whether slowing global economic growth would hit oil demand,” according to the newswire.

In global miscellany this morning:

• Greece has a new prime minister: Kyriakos Mitsotakis, the president of Greece’s liberal-conservative New Democracy party, was sworn in as the country’s prime minister, and has chosen a cabinet one day following his “sweeping election victory,” reports Euronews.
• Ethiopia is awarding two telecom licenses to multinational mobile companies and a minority stake in monopoly operator Ethio Telecom, creating excitement among multinationals keen to penetrate one of the world’s last major closed telecom markets, Reuters reports.

It was yet another night of intense focus on African diplomacy on the airwaves last night as the African Union’s extraordinary summit wrapped up in Niger yesterday.

Al Hayah Al Youm’s Lobna Assal took note of the summit’s closing ceremony, during which President Abdel Fattah El Sisi delivered a speech (watch, runtime: 5:03). The summit will be regarded as “one of the most important” as it saw the launch of the AfCFTA and a unified view to complete all projects under the AU’s development agenda, El Sisi said. Masaa DMC’s Eman El Hosary, meanwhile, set her gaze on the president’s chairing of a mini-summit between AU leaders and representatives of African economic blocs (watch, runtime: 2:09). We have more on this in Diplomacy + Foreign Trade, below.

El Hekaya’s Amr Adib took note of Alhokair Group’s Marakez for Real Estate Investment’s mall in Mansoura. The mall will be the largest in Nile Delta city, built over 47 feddans and at a cost of EGP 1.4 bn (watch, runtime: 5:06).

LEGISLATION WATCH- Employees will see 21% of their salaries go towards their pensions under the draft Social Security and Pensions Act: The House Manpower Committee has approved a number of articles in the new Social Security and Pensions Act that would see public and private sector workers pay 21% of their monthly salaries into a newly-established pension fund, sources told Enterprise. Under the draft law, employees would contribute 9% of their salaries and the employer would be required to put up the remaining 12%. The salary percentage would increase by 1% once every seven years until it hits 26%. The increases would be split down the middle between the employee and the employer, with each seeing their contribution rise by 0.5% every seven years.

This should increase the amount collected by the pension fund: The changes would replace the current cap on deductions with a fixed rate applied to all salaries, regardless of their size. Under the current system, no additional pension and social insurance contributions are taken on salary amounts exceeding EGP 5,710. The government levies a 40% charge on basic salaries up to EGP 1,670, and 35% on variable salaries up to EGP 4,040. Employees currently contribute one third of this amount and employers pay the remaining two-thirds.

The new fund will have to invest at least 75% of its money in government debt, a rate that can be reduced with the approval of the ministers of social solidarity and finance. The fund would be required to diversify the remainder of its investments and would be required to regularly report on the status of these investments to the National Social Insurance Authority, Al Shorouk reported. Another real estate investment fund would also be established under the draft law.

The law also establishes a committee of actuarial experts tasked with evaluating the social security system and providing advice to the Pensions Authority.

Separately, the House general assembly approved three bills to amend a law regulating the Bar Association yesterday, reports Masrawy. The proposed changes would provide attorneys a higher degree of protection in court, aim to increase the association’s revenues, and set up an academy to train fresh law graduates. The bills are now with the Council of State (Maglis El Dawla) for review before making their way back to parliament for a final vote.

Correction: 09/07/2019.

A previous version of this article incorrectly stated that a 35% charge is levied on salaries between EGP 1,670 and EGP 5,710.

The government wants to reel in USD 700 mn of new investments into the mining sector by 2030 and increase the sector’s contribution to GDP to USD 7 bn, the Oil Ministry said in a statement (pdf). The sector contributes 0.5% of GDP currently, the ministry said.

The Mineral Resources Act amendments, which were approved by parliament earlier this week, will be key to attracting more investment. The new amendments would introduce additional incentives for companies to invest in the mining sector. They would allow for the expansion of concession areas, granting a new authority the power to issue licenses for areas of unlimited size, and companies would be able to renew their licenses for more than one term. Separate contracts would be used for exploration and excavation areas, and royalties will be capped at 20% of the value of annual production. You can read more details about the amendments here.

M&A WATCH- Oil Ministry approves Energean’s acquisition of Edison’s Egypt oil and gas assets: Oil Minister Tarek El Molla has given his preliminary approval to Energean’s takeover of Edison’s Egypt oil and gas assets, the local press reported, citing an unidentified industry source. The Greek energy company will remain committed to the exploration and production plan agreed between Edison and the ministry, the source said.

Background: Energean is set to buy Edison’s entire oil and gas portfolio for an initial USD 750 mn, with a further USD 100 mn due after gas production from the offshore Italian Cassiopeia field begins, which is expected to happen in 2022. Edison’s Egypt portfolio are a core part of its oil and gas unit and make up 24% of the company’s portfolio. They include three producing concessions and six exploration concessions. Of the production assets, it owns a 100% stake in Abu Qir, a 60% stake in West Wadi El Rayan and a 20% stake in Rosetta. It also has a 100% stake in three exploration assets, and shares ownership of the remaining three with state-owned companies EGAS and EGPC. These assets are expected to produce an average 50k boe/d this year.

Orascom Construction boosts backlog with USD 935 mn in new projects in 2Q2019: Orascom Construction has added USD 935 mn to its backlog in 2Q2019, up 40% compared to a year earlier, the company said in a bourse filing (pdf). The new projects bring the company’s outstanding consolidated backlog to USD 4.6 bn as of 30 June, compared to USD 4.2 bn last year.

Half of the new contracts are in Egypt: New projects include the largest water treatment plant in Egypt and significant additions to the country’s road development program. The company, which as listings on Nasdaq Dubai and the EGX, recorded the highest level of quarterly order intake since 3Q2016, as it added new projects in its existing core commercial and light industrial sectors while gaining additional scope in the growing data center sector, the company said.

DISPUTE WATCH- Emaar to pay El Nasr EGP 100 mn to settle dispute: Property developer Emaar Misr has agreed to pay state-owned El Nasr Housing EGP 100 mn to settle their dispute, Public Enterprises Minister Hisham Tawfik told Al Mal. Emaar said earlier this week that the two companies will drop all arbitration cases against each other as part of a dispute resolution agreement signed last week. The agreement settled all technical, financial, and procedural points and is set for review by the cabinet, the company had said.

Background: El Nasr brought an arbitration case against the local subsidiary of UAE-based Emaar in June 2017, alleging the company had failed to develop 3 mn sqm of land allotted to it in 2005, and that it unlawfully took 215k sqm within the borders of its Uptown Cairo project. Emaar will now resume its development work in the above mentioned land plot, sources told Al Mal.

M&A WATCH- Cleopatra Hospitals Group (CHG) has said that it has no knowledge of an impending management takeover of the company’s majority shareholder Creed Healthcare and its subsidiary, Care Healthcare, by private equity fund Actis. The company “has not been informed of any change in shareholding structure, company directors or officers,” it said in a statement (pdf). Cleopatra Group said it has also “received confirmation from Care Healthcare Ltd of no change in status.” Local media reported on Sunday that the fund had received regulatory approval to take over the management of Creed Healthcare from defunct private equity giant Abraaj. Creed Healthcare owns a 69.4% stake in CHG.

What does Creed’s current shareholder structure look like? Creed Healthcare’s direct and indirect shareholders include the European Bank for Reconstruction and Development, Proparco, and Germany’s DEG (which directly hold a combined 27.5%), and private equity funds ANAF II and APEF IV holding 30% and 42.5%, respectively. APEF IV is under the management of Abraaj’s fund management business, AIML, while ANAF II is currently managed by RMBV, a Dutch fund management vehicle in which Cleopatra Hospitals Group Chairman Ahmed Badreldin is a director.

Economic growth to remain stable over the coming two years -NBK: Egypt’s economic growth is set to remain stable over the coming two years, with GDP expanding at a 5.2% clip during the current fiscal year and 5.0% in FY2020-2021, the National Bank of Kuwait (NBK) forecasts in a new report. Growth will be supported by increasing capital expenditure, a rebound in tourist receipts, and surging natural gas production.

Inflation: NBK expects inflation to average 12.5% during FY2019-2020, but sees it reaching the central bank’s 9% target rate in FY2020-2021. Should inflation continue on this path, NBK forecasts the CBE to move ahead with 100-200 bps of rate cuts by the middle of 2020.

The country’s debt burden remains a problem, and will continue to make it harder for the government to make serious progress with reducing the budget deficit. NBK forecasts the debt-to-GDP ratio to increase during the current fiscal year to 90% from 86%.

The 7.2% deficit target is achievable, though, provided that the government pushes ahead with its reform commitments, and that oil prices remain within the budget’s benchmark price of USD 65-67 bbl.

INVESTMENT WATCH- First factory in New Alamein to open in 1Q2020: The Industrial Development Group (IDG) aims to complete the procedures of opening the first factory in New Alamein in 1Q2020, IDG Managing Director Sameh Attia said. The factory will produce building materials and is owned by an unnamed Egyptian investor. The IDG has so far received 500k sqm of a total of 2.7 mn sqm in New Alamein, which it plans to invest EGP 3 bn in developing.

Another cement factory on the ropes? El Nahda Cement has decided to partially suspend the main production line at its Qena factory for six months after sales fell due to oversupply, sources told Al Mal. The Chemical Industries Holding Company increased its stake in El Nahda to 50% earlier this week after it acquired another 30% of the company for EGP 319 mn. It shares ownership of the company with Misr Holding which owns 20% and Arab Contractors which owns 30%. The news comes a few weeks after Heidelberg Cement subsidiary Tourah Cement said it could enter liquidation after suspending production due to oversupply. A World Bank delegation is visiting several industrial zones in Qena today, the local press reported earlier this week.

EARNINGS WATCH- Our friends at CIB delivered a 13% y-o-y increase in net income of EGP 2.71 bn in 2Q2019 on revenues of EGP 5.21 bn, which rose 4% y-o-y. CIB recorded a capital adequacy ratio of 25.8% by the end of the quarter, which is above the minimum regulatory requirement. Net income for the first half of the year grew 21% y-o-y, coming in at EGP 5.36 bn. Commenting on the bank’s earnings, management said CIB “built on its strong performance at the onset of the year” to achieve “robust” balance sheet growth. The bank’s FX trading activity and strong topline performance were also buoyed by “Egypt’s strong macroeconomic conditions,” including the recent EGP appreciation against the greenback.

Looking ahead, the bank sees the macroeconomic climate during the second half of the year bringing with it a “somewhat high degree of ambiguity … in view of the anticipated inflationary pressure likely to accompany the energy subsidy cuts that took place at the onset of the current quarter.” Management remains confident, however, that CIB is well-equipped to adapt to macroeconomic and regulatory developments throughout the remainder of the year. You can read CIB’s full earnings release here (pdf).

MOVES- Former Transport Minister Hisham Arafat has been tapped as the chairman of Amer Group, the local press reported. Arafat, who handed over his resignation to cabinet in February in the aftermath of the Ramsis train crash, will lead the real estate development group after founder Mansour Amer stepped down.

Sovereign investors shift towards emerging markets, Asia: Sovereign investors increasingly see the largest EM economies as being more attractive investment destinations than their developed market counterparts, in a sharp turnaround from 2017 sentiment, according to a study (pdf) by investment management company Invesco. The report, based on interviews with 139 sovereign investors and central bank reserve managers, finds that 36% intend to raise allocations to EMs, compared to 40% for Asia and just 13% for Europe. The fact that investors are increasing allocations in spite of the challenges faced by developing economies indicates the long-term appeal (or “growing stickiness”) of EMs, the report notes.

Europe’s loss is our gain: Slowing economic growth and heightened political risk, including the impact of Brexit and the rise of populist movements, are contributing to the shift away from sovereign investment in Europe. “A large chunk of Europe has negative bond yields and growth forecasts are relatively low compared to emerging markets, so from an investment perspective it’s less attractive,” said Alex Millar, head of EMEA institutional at Invesco, told Reuters.

China is seen as particularly attractive: Despite its trade tensions with the US weighing on investor decisions, China’s appeal among sovereign investors has increased more than any other EM this year. Sovereign investors cited a new investment law passed in 1Q2019 that prohibits the forced transfer of technology from foreign-invested businesses as a particularly positive step.

Fixed income allocations are up as equity volatility rises: The number of sovereigns planning to increase investment in bonds has increased to 33% while equity allocations have fallen to 30%. The move towards more defensive portfolios follows a year of increasing turbulence on the equity markets.

How will the tech startup scene evolve? This Visual Capitalist infographicdepicts the results of First Round’s State of Startups 2018 survey with insights from 529 startup founders on which tech startups are going to be shaking up Silicon Valley (and beyond) in the future.

The key findings? Payments startup Stripe is predicted by 19% of respondents to be the next big growth story over the coming 10 years, with SpaceX, Coinbase, and Slack hovering close behind. Uber is tapped as most likely to produce the next “PayPal Mafia,” with 22.5% of respondents believing the next generation of notable founders may emerge from the mass transportation company in the coming five years.

The fallout from the Egyptian national team’s Afcon exit is still dominating coverage in the foreign press. Mohamed Salah expressed his disappointment at the loss on Twitter, thanking fans for their support and saying he hoped that the team would learn from their mistakes. Meanwhile, Merhan Keller, who accused Amr Warda of [redacted] harassment earlier in the tournament, has reportedly been fielding blame from angry fans who claim she contributed to the team’s downfall. She eventually persuaded Facebook to deactivate over 75 fake accounts under her name following the Pharaohs’ defeat, the National reports.

Human Rights Watch is calling on authorities to release Ola Al Qaradawi, who was rearrested on 4 July, one day after a judge ordered her release on probation following two years in pretrial detention without charge. Ola, the daughter of Yusuf Al Qaradawi — who was sentenced to death in absentia in June 2015 — has now been charged with membership and support of a terrorist group.

Also worth a skim:

• The ancient ruins of the Egyptian Old Kingdom hold the solutions to today’s economic, social, and political challenges, archaeologist Sarah Parcak told the New York Times in a conversation about her new book, Archaeology from Space: How the Future Shapes Our Past.

President Abdel Fattah’s chairing of a “mini-summit” yesterday between African leaders and the heads of major economic blocs on the continent during the extraordinary African Union summit in Niger topped the front page of state-owned Al Akhbar. Both Al Ahram and Al Gomhuria’s websites are down again this morning.

What does science tell us is the best way to fiddle away spare cash? You may have heard of research findings that beyond a certain level of income, the amount of extra happiness we get from extra cash tends to flatten out. But how we spend our surplus cash is the real game changer, and science now knows which habits are the most strongly correlated with happiness. This episode of the Bloomberg Good Money dives deeper (watch, runtime: 6:40).

Set your eyes on the (social) prize: Marital and social relationships are “by far” the biggest predictor of sustained human happiness, according to the Harvard Study of Adult Development. Can we buy good relationships? Not quite, but we can certainly spend to nourish and build valuable ones.

Buy more experiences, fewer things: A decade-old study by Cornell researchers found that, on average, buying things for ourselves doesn’t do much for our happiness. But buying experiences which we can anticipate, live through, share with others, and reminisce over can go a long way.

El Sisi calls for international support for Africa: President Abdel Fattah El Sisi urged the global community to support Africa in developing joint economic projects during a "mini-summit" of African leaders and major economic blocs yesterday, Ahram Online reports. The president separately discussed moving forward with the proposed Cairo-Cape Town highway in a meeting on the mini-summit’s sidelines with his South African counterpart Cyril Ramaphosa, according to an Ittihadiya statement. The two discussed economic cooperation and other joint infrastructure development projects on the continent. El Sisi also met with Congolese President Félix Tshisekedi.

Orascom Development Egypt (ODE) has sold its 51% stake in Oberoi Zahra, a Nile cruise floating boat, to a private investor for an enterprise value of USD 4 mn, the company said in a press release (pdf). The sale will result in cash proceeds of USD 2 mn that will be used for the group’s expansion plans.

Egypt Post has launched a package of new electronic services, including EasyPay, a card to make transactions and online purchases that can be charged at any of the country’s post offices and has a mobile app, the local press reported. The Post Authority has also launched Easy Box, Biometric ATMs, and Interactive Teller Machine services.

The central bank has approved a request by Banque du Caire (BdC) majority-owned Cairo International Bank in Kampala to raise its capital to USD 5 mn from USD 2 mn, BdC Chairman Tarek Fayed told Masrawy.

UNDP to support local governance in Upper Egypt: The Local Development Ministry and the United Nations Development Programme (UNDP) have signed an agreement to launch a joint project to improve governance and promote administrative decentralization in Upper Egypt, the UNDP said in a statement. The project “will support the ministry’s efforts to create a modernized and decentralized local administration system.”