Former President Hosni Mubarak is dead at age 91

Egypt is observing three official days of mourning after former president Hosni Mubarak passed away yesterday at age 91, Ittihadiya said in a statement. His funeral and burial will take place today, and the Mubarak family will be accepting condolences on Friday at the Mosheer Tantawy mosque. The former president’s passing is leading the conversation on Egypt in the regional and foreign press this morning, and saw widespread coverage in the domestic press yesterday. We have the story in full in this morning’s Speed Round, below.

Shoukry heads to Washington for GERD talks — and Ethiopia decides to be a no-show: It appears Egypt, Ethiopia, and Sudan will not be reaching a final agreement over the Grand Ethiopian Renaissance Dam (GERD) by the end of the month as was previously hoped, with Ethiopia saying yesterday it would not be attending what was widely believed to be the final round of talks over the dam. Foreign Minister Sameh Shoukry is in Washington, DC today for the talks, which take place tomorrow and Friday, according to cabinet statement.

Telecom Egypt will meet today with financial advisors EFG Hermes and Citibank to discuss how it will respond to Saudi Telecom’s planned USD 2.4 bn acquisition of Vodafone Group’s 55% stake in Vodafone Egypt. TE, which holds the remaining 45% of the company, could stop what could be Egypt’s largest M&A transaction in its tracks if it chooses to use its pre-emption rights and make a counteroffer to purchase Vodafone Group’s stake.

The House Planning and Budgeting Committee is almost ready to pass the new draft Customs Act, head of the Customs Authority El Sayed Kamal Negm said, according to Al Mal. The new act would integrate the customs and customs exemption acts into one legislation and includes electronic documents submission and electronic signatures. The proposed Customs Act is expected to come into effect in 1H2020, and would expedite clearance through a white list of importers, broaden the powers of customs clearance agents, and include customs breaks for local manufacturers, among other things.

Our elected representatives will take a short recess until 8 March, reports Al Shorouk. Committee-level meetings will continue as they normally would during the recess, but general assembly meetings will be on pause.

The EGP rally may push the government's fuel pricing committee to lower prices when it meets next month, Oil Minister Tarek El Molla hinted yesterday. The EGP appreciation, alongside a trend that has seen global oil prices plummet since the covid-19 outbreak, could prompt cuts. The committee maintained prices for all grades when it held its 1Q2020 meeting under a new pricing mechanism which took hold last year.

More favorable energy prices for factories -El Said: Manufacturers may also see be getting lower energy rates when another committee meets next month, said Planning and Economic Development Minister Hala El Said. The government recently set up a committee tasked with reviewing energy prices every six months. In its first meeting last October, the committee lowered the price of natural gas for the cement, metallurgy, and ceramics industries after repeated calls and lobbying efforts.

President Abdel Fattah El Sisi has ratified amendments to the VAT Act raising the sin tax on cigarettes and tobacco products, according to Masrawy. The decision was published in the Official Gazette yesterday.

The Egyptian Private Equity Association is holding its general assembly and a networking event tonight at Nostalgia Ballroom at Le Pacha Boat 1901.

Coming up next week:

• Business Today’s bt100 awards ceremony (pdf) takes place on Tuesday 3 March.
• The two-day Women Economic Forum (pdf) gets underway on Wednesday, 4 March in Cairo.
• The Union of Arab Banks will hold a three-day forum for risk officers on 6-8 March in Hurghada.
• A one-day investment conference for the Suez Canal Economic Zone will take place on Saturday, 7 March.

CORONA WATCH- Oxford Economics predicts covid-19 outbreak might wipe out more than USD 1 tn from global GDP, as the virus has claimed over 3k lives and infected over 80k people so far, according to Bloomberg. An international health crisis could undercut global GDP due to workplace absenteeism, lower productivity, declining travel, disrupted supply chains, and reduced trade and investment.

Are the IMF and WHO in covid-19 denial? The World Health Organization has said the virus outbreak is “deeply concerning” but has still stopped short of deeming it a full-blown global pandemic, while the IMF thinks the virus will only force it to knock 0.1 percentage points from its 3.3% global growth forecast for 2020. S&P said yesterday it expected global growth to slow down by 0.3 percentage points this year as a result of the outbreak, with China’s growth forecast reduced by 0.7 percentage points.

The UAE and Turkey have placed restrictions on flights to Iran, which is emerging as the leading disperser of covid-19 in the Middle East with almost 100 cases, according to Bloomberg.

Bahrain has also halted flights from Dubai and Sharjah, where many Iranian travelers transit to reach Bahrain. Almost all of the cases in the GCC at present are believed to have an Iranian vector involved.

Kuwait has also decided to refuse entry to individuals traveling from China, Singapore, Hong Kong, South Korea, Thailand, Italy, and Iran in a bid to curb the spread of the virus.

US markets closed down sharply yesterday, with the S&P500 shedding 3% and Asian markets are down again this morning, from China to Korea and Japan. Meanwhile, the yield on 10-year US treasuries hit a record low, with the WSJ noting that “the 10-year yield was pushed sharply lower by reports the coronavirus was spreading outside China.”

US health officials have warned that the spread of the virus to America, with a top Center for Disease Control official saying yesterday that “the current global circumstances suggest it is likely this virus will cause a pandemic” that could present “severe” disruptions to daily life.

Investors are offloading the World Bank’s “pandemic bonds” amid expectations they will begin paying out to the countries affected by covid-19, according to the Financial Times. These bonds were designed to pay out interest to investors until a pandemic hits (and some requirements, including a certain number of deaths in more than one country, are met), at which point the payments are made to the affected countries. The covid-19 outbreak has so far met most of these requirements, meaning investors won’t be pocketing the double-digit returns on the bonds for much longer. While the instrument is meant to help curb these health disasters, the requirement that 12 weeks pass from the initial outbreak until funds are directed to the issue itself means the payout might be “too little, too late.”

The UAE is aiming to produce 44% of its energy from renewable sources, Energy Minister Suhail Al Mazrouei said without specifying a timeframe, according to Bloomberg. However, he did specify that the country aims to capture 5 mn tons of carbon dioxide by 2030.

S&P downgrades Lebanon’s credit rating as debt default is almost a sure thing at this point: With a March 9 deadline to repay its USD 1.2 bn eurobond fast approaching, S&P Ratings says Lebanon defaulting on the payment as all but a forgone conclusion. The ratings agency downgraded its long-term foreign and local currency sovereign debt ratings to CC from CCC, with a negative outlook. A default would be the first in Lebanon’s history, but S&P says it’s also possible the government could restructure the debt through “an exchange offer swapping 2020 bonds for longer-dated securities,” which the agency says it would view as “distressed and tantamount to default.”

Knives out for Bernie and Bloomberg: The Democratic Debate in South Carolina wrapped up minutes before dispatch time, after more than two hours of the candidates collectively beating up on Senator Bernie Sanders in a bid to curb his momentum following a landslide win in the Nevada caucus. Michael Bloomberg also got some flak for his time as New York City mayor and “his past support for Republicans,” CBS says. The New York Times has a blow-by-blow of the debate and CNN has a fact-check on all the candidates’ statements.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education.

In today’s issue: We sat down with East Port Said Development’s commercial director, Shahira El Fiky, for a chat on the new agreement signed with Banque Misr for EPD’s East Port Said Industrial Zone, the type of international and domestic businesses that might be attracted to what hopes to become a premier manufacturing and export hub, and the impact the covid-19 virus is having on the business.

PSA- Torrential rains now past, we look set to enjoy our customary three weeks of spring: The next few days should bring us milder weather in the capital city, with daytime temperatures sitting between 21-23°C until Friday, when the mercury looks set to spike to 26°C. The evenings will remain chilly at 11-12°C, according to the meteorological authority.

The death of former President Hosni Mubarak dominated both broadcast and print media, with the talking heads collectively celebrating the ousted leader as a war hero. Among those taking note: Al Hayah Al Youm’s Lobna Assal (watch, runtime: 2:25), Masaa DMC’s Ramy Radwan (watch, runtime: 7:09), Min Masr’s Amr Khalil and Riham Ibrahim (watch, runtime: 4:06), and Yahduth Fi Misr’s Sherif Amer (watch, runtime: 8:04). Amer spoke to political pundit Abdel Moneim Said for analysis of the final years in power that led to the 2011 ouster and Khalil dedicated a significant segment to recap Mubarak’s professional history (watch, runtime: 20:19). We have chapter and verse in this morning’s Speed Round, below.

Commentary on covid-19: If China resumes its exports to the world, the extent of the outbreak’s effect on the global economy would significantly ease, Egyptian-Chinese Business Council deputy head Mostafa Ibrahim said on Min Masr (watch, runtime: 3:09). Importers can look for alternatives, but they are unlikely to be as cost effective and in line with Chinese specifications, Ibrahim says.

China exports 70% of global industrial needs, and as a result of factories shutting down in the Asian country, investors are selling manufacturing stocks and turning to gold as a safe haven asset, deputy head of the Federation of Egyptian Industries’ gold division separately told Khalil (watch, runtime: 28:24).

Former president Hosni Mubarak died at a military hospital yesterday at the age of 91, his oldest son, Alaa, confirmed on Twitter yesterday. State TV also reported the news in the early afternoon. He had undergone surgery earlier this month, after which Alaa said he was in “stable condition,” but later said the former president was in the ICU. He is survived by his wife, Suzanne Thabet, and sons Gamal and Alaa.

Condolences began rolling in shortly after confirmation of Mubarak’s passing, with Ittihadiya, cabinet, and the Armed Forces leading the way. Israeli Prime Minister Benjamin Netanyahu and Palestinian President both issued statements, according to the Associated Press. The leaders of Saudi Arabia, Bahrain, the UAE, and Kuwait also offered their condolences, Ahram Online reports.

A polarizing figure in politics since his departure from the scene, Mubarak’s economic legacy is mixed. While he’s generally seen as having paid scant attention to the economy in the 1980s (other than continuing Sadat’s Open Door policy), the long-serving president negotiated debt forgiveness and structural adjustment program that got it IMF backing and convinced the Paris Club of creditors in 1991 to forgive half of the country’s USD 20 bn in debt at the time. Later that decade, Mubarak’s administration brough the stock exchange back to life and gradually created room for the private sector to flourish as it moved ahead with privatization programs, tried to trim red tape, and sought to clarify tariffs and taxes. That process culminated in the appointment of the reformist Prime Minister Ahmed Nazif, who presided over a period of sustained economic growth in the late 2000s. Mubarak also funded and refused to rationalize a subsidy program whose ruinous energy subsidies were at the root of the economic crisis that took hold in the years since the 2011 revolution that toppled him.

The domestic and regional press gave the former president’s death plenty of attention, with state-owned Al Ahram and Al Gomhuria carrying positive commentary on Mubarak’s time in office, including from NDP-era House Speaker Ahmed Fathy Sorour, political commentator Mostafa El Fekki, and former presidential candidate Ahmed Shafik, among many others. Op-eds remembering Mubarak in a widely positive light were also published in Asharq Al Awsat (here and here), Al Masry Al Youm (here, here, and here) and Al Shorouk.

The foreign press was all over the story, with some carrying customary obits and others taking a crack at commenting on his reign — and if the domestic press was mostly laudatory, the international press has taken a more commentary-laden approach to assess Mubarak’s legacy. The Associated Press, Reuters, the Financial Times, the Wall Street Journal, and Deutsche Welle took the basic factual route in reporting the former president’s death. The New York Times also was out with a video obituary recapping his presidency, ouster, and trials (watch, runtime: 4:51), while former Cairo bureau chief Michael Slackman turned in the paper’s official obituary, likening Mubarak to a “modern day Pharaoh” whose place in history was “upended.” Other outlets, including the Guardian, Foreign Policy, the Economist dissected the former president’s economic and political legacy, saying he was responsible for ushering in an era of economic growth that was undermined by low living standards, corruption, and political repression. Typical of commentary from the think tank set is the US think tank Brookings. The New York Times’ Declan Walsh and Nada Rashwan, the Washington Post’s David Ignatius, and Reuters Breakingviews’ Ed Cropley also offer their two cents on the lessons Mubarak leaves behind for contemporary Egypt.

Egypt will launch an international bid round for gold and mineral exploration on 15 March, and will accept bids until 15 July, the Oil Ministry said in a statement (pdf). Investors will bid for exploration in the Eastern Desert over an area totaling 56k sqkm using the block-basis concessions system, with blocks around 170 sqm each, the local press reports. Winning bids will be awarded within four months of the tender being launched.

The ministry will launch new gold exploration tenders every four months, Minister Tarek El Molla said in a press conference yesterday.

One caveat: Companies which have not submitted “serious” bids in previous auctions will not be considered in next month’s tender, the minister said without elaborating.

An acid test for the government’s regulatory reform: This will be the first tender of its kind since amendments to the Mineral Resources Act designed to jump-start investment in the sector were passed last year. Under the new regulations, gold mine operators will pay the minimum 5% royalty, EGP 25k in rent each year per sq km, and income tax of 22.5%. Kind words have been said about the legislation’s more investor-friendly terms, but whether this translates into more investment will be determined largely through investor appetite in the coming tenders.

How popular will the tender be? It’s too early to tell: Centamin — currently Egypt’s sole gold producer — said last week that it was waiting on further information before deciding whether it will submit a bid. La Mancha Mining Chairman Naguib Sawiris has been less circumspect, saying last week that he’s “willing to participate in any area that could be promising.”

Sawiris Shalateen mining talks confirmed: El Molla confirmed during a press conference yesterday that the government is in talks with Naguib Sawiris to sell a 51% stake in its Shalateen mining company. The Egyptian bn’aire said earlier this week that La Mancha was in negotiations for the majority stake in the state-owned company. Ownership of Shalateen is split between several government organizations: The Egyptian Mineral Resources Authority owns 35%, the military’s National Service Projects Organization 34%, the National Investment Bank 24% and the Egyptian Company for Mineral Resources 7%. It remains unclear which companies are in talks with Sawiris to offload or reduce their stakes.

Egypt and Ukraine offer the world's most attractive EM bonds -Deutsche Bank: With high real interest rates, improving geopolitical situations, and sweeping reforms, Egypt and Ukraine’s bond markets are among the most attractive across emerging markets, Deutsche Bank said in a report cited by the local press. While Ukraine’s sovereign debt instruments have been outperforming its EM peers over the past few months, the bank says it holds a more positive outlook for Egypt’s.

Once you take risk into account, Egypt becomes all the more attractive to carry traders: Investors have begun to worry that Ukraine may suspend its economic reform program, while Egypt becomes an increasingly attractive market thanks to decelerating inflation and lower oil prices. Egypt’s GDP growth is also on track to outpace Ukraine’s by a wide margin: The Egyptian economy is projected to grow 5.8% in FY2019-2020 and 5.9% in FY2020-2021, while Ukraine is set to see its economy grow at a 3.5-4% clip during the current fiscal year. The EGP has offered one of the best carry trades in the world over the past five years at 30.0%, coming in second behind the RUB, Bloomberg said in December. The Central Bank of Egypt is also expected to hold off on more interest rate cuts for a little while in a bid to maintain the strength of the carry trade, EFG Hermes said earlier this month.

We still have the highest yield among emerging markets: Despite last year’s monetary easing cycle that saw interest rates falling by 450 bps, Egypt still offers the highest yield at 13.5%, followed by 10.2% in Turkey, and 9.4% in Ukraine. The interest rate on five-year treasury bonds in Ukraine was up by 4.7% to 9.5%, while interest on the same bonds issued by Egyptian dropped 4.3% but remained higher than Ukraine at 13.5%.

Meanwhile: Foreign holdings of Egyptian treasury bills have jumped to USD 18.2 bn (c. EGP 289 bn) as of the end of January, up from 15.8 (EGP 254 bn) in the previous month and USD 15 bn (EGP 234 bn) in January 2019, according to the CBE’s monthly statistical bulletin (pdf). Credit Suisse said in December that Egyptian government debt will pay lower returns through 2020 but will remain “robust.”

M&A WATCH- Regulator to review Titan Group’s MTO for Alexandria Cement: The Financial Regulatory Authority (FRA) has received and will begin reviewing a mandatory tender offer (MTO) Titan Group subsidiary Alexandria Development submitted for 100% of Alexandria Portland Cement, according to a regulatory filing (pdf).

Background: Greek cement company Titan had acquired Alexandria Development, which is Alexandria Portland Cement’s parent company, making it an indirect majority owner through a related party and therefore triggering an MTO requirement. The FRA had ordered Titan to present an MTO, including a fair value assessment of Alexandria Cement’s shares. Titan’s MTO for 100% of Alexandria Cement offered EGP 6 per share, and would see the company delist Alexandria’s shares from the EGX after the transaction.

LEGISLATION WATCH- House Legislation Committee to review Anti-Money Laundering Act: House of Representatives Speaker Ali Abdel Aal has referred the proposed amendments to the Anti-Money Laundering Act House Legislation Committee for review, according to Mubasher. The amendments proposed by the government would expand the definition of “money” to include oil, natural resources, securities, and cryptocurrency, among others. The changes would also, if passed, introduce a seven-year prison sentence and hefty fines on those found guilty of laundering any form of “money.”

REGULATION WATCH- The Financial Regulatory Authority (FRA) is preparing a draft law that would require financial institutions to digitize their transactions, Advisor to the FRA Chairman for Information Technology Tarek Fathy said, according to the local press. Fathy did not provide further details on the bill, saying only that the move is meant to cut back on errors and inefficiency in these firms.

EARNINGS WATCH- Palm Hills Development’s net profit after tax and minority interest revenues inched up 4% y-o-y 2019 to EGP 846.8 mn, up from EGP 811.7 mn in 2018, according to an EGX filing (pdf). The company’s revenues fell 16% y-o-y to EGP 6.2 bn, from EGP 7.4 bn the year prior.

Correction: 26/02/2020

A previous version of this article incorrectly stated that PHD’s revenues increased by 16% in 2019.

Foreign press coverage of Egypt is squarely focused this morning on former president Hosni Mubarak’s death. We have the full story in Speed Round, above.

Other headlines to skim:

• The story of the three Jewish brothers who introduced animation in Egypt and the Arab world is now being told through a new documentary, according to Tablet Magazine.
• The Times has a recap of why Egypt’s soaring population is cause for concern.
• Egyptian novelist and journalist Ahdaf Soueif was profiled by the National.

Covid-19 test kits apparently aren’t always 100% reliable, which is compounding the problem of its spread across continents, the Wall Street Journal says in this explainer video (watch, runtime: 03:37). There are several factors and variables that can affect the test kits’ efficiency in delivering accurate results, such as how the swab is inserted into your nose or throat and how long the samples take to arrive at the lab, says Singaporean biomedical research lab Biopolis CEO Sidney Yee. Results could also be affected by which stage the virus is at, Yee explains. Medical professionals are now using other diagnostic methods, including chest scans, concurrently with the test kits to yield more conclusive results.

Egypt, South Korea mull economic partnerships: Egypt and South Korea have set up a joint expert to committee to explore potential trade and manufacturing, oil and gas, ICT, education, and SME partnerships, Trade Minister Nevine Gamea said following a meeting with a Korean business delegation headed by her Korean counterpart, Yoo Myung-hee, according to Al Shorouk. The two governments are already in talks to manufacture agricultural equipment for Egypt, Gamea said.