Cabinet to Egypt: It’s back to some semblance of “life as usual” after the Eid

Good morning, friends, and welcome to the second half of Ramadan — and to our readers in North America, happy Mother’s Day.

We have just 13 days left until Eid and 235 days until we can put this thing called “2020” behind us.

TAKE OUR POLL- What do you expect for the rest of this year? We do an annual reader poll asking what you expect of business conditions and the economy in the year ahead. Covid-19 has us thinking that the results of this year’s survey need updating. Take a minute and tell us how covid-19 has impacted your business, whether it’s changed your outlook on the economy, and what you think of WFH. You can take the survey here.

You started the year expecting investment to pick up, looking to hire new staff and thinking this would be a great year for M&A. We’re asking you to take the survey this week and next and we’ll be back after Eid with the results.

THE STORY OF THE DAY- The Madbouly government spent the last 72 hours driving home one point: We’re all going back to some semblance of “life as usual” after Eid. Cabinet members including the PM Moustafa Madbouly and the ministers of finance, planning and health led the charge Thursday and through the weekend.

The nighttime curfew and restrictions on public gatherings will remain in effect until the end of Ramadan, Madbouly said on Friday, making official his announcement of the day before. That means schools, universities, public parks, beaches and government offices — with the exception of some real estate registry and notary offices, traffic departments, and some courts — are staying closed at least until 26 May, when Eid El Fitr ends. All restrictions otherwise remain unchanged: Restaurants are open for delivery only, nightclubs and bars are closed, and malls and retail outlets face curtailed hours (but continue to be allowed to open on weekends, as they have since the start of Ramadan.)

Egypt will have to “coexist” with the virus that causes covid-19 as restrictions start easing in June, cabinet spokesman Nader Saad said on Thursday (watch, runtime: 11:23). His remarks drew a line under recent comments to the same effect from Health Minister Hala Zayed and Madbouly.

Saad flagged that new requirements may come into effect as restrictions are eased. Among them: face masks are “basically a necessity” now and may be required to access government offices or go to the theatre after the holiday. Businesses that flout maximum capacity regulations and citizens who fail to wear masks when required could face fines of EGP 300-5k as part of an in-the-works piece of legislation, MP Elizabeth Shaker said on state TV yesterday (watch, runtime: 3:00).

The government could still roll out additional measures to support the economy and hasten a recovery, Madbouly said (watch, runtime 2:40). The prime minister noted that the government plans to ramp up by 75% its investment in healthcare and infrastructure in the upcoming fiscal. And it still has dry powder in reserve: The Finance Ministry has deployed only EGP 40 bn of the EGP 100 bn it has allocated to stimulus measures, minister Mohamed Maait said over the weekend. We have more on this front in this morning’s Speed Round, below.

Egypt’s recovery from covid-19 could begin in June — or December, said Planning Minister Hala El Said during a virtual meeting with business leaders, according to a ministry statement. The nature of the pandemic will itself dictate the timeline. The length of the recovery period could vary by industry, she said, but look for agriculture, tech, pharma, and construction to bounce back first, El Said suggested. Finance Ministry Mohamed Maait was also on the interview circuit over the weekend.

When will commercial flights resume? There’s no official word yet, but we got a hint it is on the agenda as the PM toured Cairo International Airport yesterday with the ministers of civil aviation and of information in tow. Madbouly’s visit was to review measures in place to stop the spread of the coronavirus, the domestic press said.

Hotels nationwide are preparing to reopen this coming Friday, 15 May, to domestic tourists. Properties will be limited to 25% of maximum capacity at first and will be required to hire inspectors to ensure they are in compliance with a laundry list of measures, according to Al Masry Al Youm. They would have to bring in Germany’s TÜV NORD, the UK’s Cristal Standards or Spain’s Preverisk Group for quarterly check-ups.

The government is hoping plenty of us will opt to fly instead of driving to Red Sea and Sinai resorts to start generating revenues for domestic airlines including national flag carrier EgyptAir.

News triggers to keep your eye on over the coming days:

• Inflation figures for April are due today;
• The IMF’s executive board meets tomorrow to vote on a USD 2.7 bn “rapid financing instrument” for Egypt;
• The CBE’s Monetary Policy Committee meets next Thursday, 14 May, to review interest rates.

PSA- Summer is coming and we’re looking at our first real heat wave of the year. Look for the mercury to gradually rise from 31°C today to 38°C on Wednesday before peaking at 41°C next Sunday.

The only thing we dislike more than Ramez Galal’s Ramadan show: Those who make a spectacle out of trying to censor him. Hats off to the good people at Shahid Law, who for the second year running, beat back an attempt by the self-appointed morality police to have the show yanked off the airwaves. Shahid’s Sameh Atteya and colleagues masked-up and headed to court, where they successfully argued that MBC Group should not be required to pull the show.

So, when do we eat? Maghrib prayers are at 6:38pm and you’ll have until 3:27am to finish caffeinating. Fajr is coming one minute earlier every day through the end of the Holy Month.

COVID-19 IN EGYPT-

Egypt has now disclosed a total of 8,964 confirmed cases of covid-19 after the Health Ministry reported 488 new infections yesterday. The ministry also said that another 11 people had died from the virus, taking the death toll to 514. We now have a total of 2,476 confirmed cases that have since tested negative for the virus after being hospitalized or isolated, of whom 2,002 have fully recovered.

Yesterday’s count came after the Health Ministry reported a record 495 new cases and 21 deaths on Friday, according to a Health Ministry statement.

Egypt’s covid-19 isolation facilities are not maxed out, presidential health advisor (and former health minister) Mohamed Awad Tag Eldin said last night in a phone call with Al Kahera Al Aan’s Lamees El Hadidi (watch, runtime: 12:27). Tag Eldin denied a press report last week quoting Assistant Health Minister Ahmed El Sobky as saying Egypt’s 17 isolation centers had hit capacity. Some centers have no covid-19 patients at all, Tag Eldin said.

A total of 30 hospitals will be ready before June to replace the isolation centers, Health Minister Hala Zayed said yesterday evening. The 30 are among some 35 hospitals specialized in fever and respiratory diseases that the ministry is renovating right now. The ministry hopes to phase out isolation facilities and handle cases entirely in designated hospitals.

Egypt has performed 105k PCR tests since the start of the outbreak, the State Information Service (SIS) said in a statement, clarifying earlier remarks by Tag Eldin, who told reporters on Thursday that the government had conducted more than 1 mn tests. The 1 mn figure includes other medical checks to screen for potential infections, the statement said.

We’re buying remdesivir to treat covid-19: Egypt will soon receive a shipment of remdesivir antiviral medication to treat covid-19 patients, Health Minister Hala Zayed announced. Both the US and Japan have approved the use of Gilead Sciences’ medication to treat the virus but the jury is still out on how useful it is. US disease expert Anthony Fauci claimed there is “clear-cut” evidence that remdesivir shorten recovery times, but a study in the noted medical journal The Lancet suggested it provides little significant benefit.

Egypt repatriated some 1,220 citizens from Saudi Arabia, Kuwait, Turkey, Chad, as well as Oman and Sudan over the weekend, according to the Emigration Ministry.

IMPACT ON BUSINESS-

Business lobby group calls on CBE to widen low-interest loan program to services sector: The Federation of Egyptian Chambers of Commerce is lobbying the Central Bank of Egypt to provide low-interest loans to service and retail businesses, Youm7 reported. The CBE currently provides subsidized loans carrying interest rates of between 5-8% to factories, home-buyers, and tourism companies.

Contractors and real estate developers want more government support to help them weather the crisis, according to a cabinet statement. Representatives of the real estate sector have requested that the government allow higher-value properties to qualify for the Central Bank of Egypt’s mortgage financing initiative, while contractors asked for faster, regular payments for work completed on public contracts.

A new post-covid minimum wage for the private sector? The Planning Ministry is looking to introduce a mandatory minimum wage of EGP 2k per month for workers in the private sector after the covid-19 crisis abates, said Deputy Planning and Economic Development Minister Ahmed Kamal, according to Al Shorouk. The announcement came during a House Planning and Budget committee meeting last week when the National Wages Council advised MPs that private sector wages should be no less than EGP 12 per hour or EGP 2k per month.

Two cases at BdC’s Talaat Harb branch: Banque du Caire has closed a branch in Downtown Cairo after two employees tested positive for covid-19, Chairman Tarek Fayed said in a statement carried by Hapi Journal. Fayed’s statement came after social media posts claimed the branch’s entire staff had been infected.

The European Union has doled out EUR 89 mn to Egypt’s healthcare sector as part of a EUR 1.5 bn aid program to help Egypt, Jordan, Palestine, Morocco and Tunisia respond to the crisis, EU ambassador to Egypt Ivan Surkos told Egypt Today. The funds will be used to purchase medical equipment and train health workers.

ON THE GLOBAL FRONT-

More than 4 mn people worldwide are now confirmed to have been infected with the virus that causes covid-19, according to data published by Johns Hopkins University. The global death toll now stands at 277k.

Corona is in the White House: Two White House staff members were diagnosed with coronavirus over the weeked: one of President Trump’s personal valets and VP Mike Pence’s press secretary. The heads of the CDC and the FDA as well as Anthony Fauci — all key members of the committee leading the response to corona in the US — have all said they were “potentially exposed and will be self-quarantining or teleworking for two weeks,” according to the Washington Post.

Europe looks to revive its battered travel, tourism sectors: The European Commission will this week try to persuade member states to guarantee vouchers cancelled due to the pandemic and begin lifting border restrictions to incentivize people to travel, according to a strategy document seen by Reuters. The EU had previously called for a “Marshal plan for European tourism.”

Air passengers arriving in the UK will have to quarantine for two weeks as part of the government’s strategy for avoiding a second wave of the virus, Sky News reports. Similar measures are already in effect in other countries, including Canada.

Little Richard dies at 87: America’s self-proclaimed “architect of rock ‘n’ roll” and genre Hall of Famer Little Richard passed away yesterday at the age of 87. Check out his obit in Rolling Stone.

On our podcast this week: Amro Abouesh, CEO and Managing Director of Tanmeyah, who left a comfortable position with Banque du Caire to roll the dice as a founder of Tanmeyah, which has grown from a scrappy startup into the nation’s leading private-sector microfinance player — and prompted just about everyone else in the finance industry to look at how to make money serving the ‘bottom of the pyramid’ in the nation’s economy. Tanmeyah grew as a portfolio company of investment company Qalaa Holdings before being acquired by frontier and emerging markets financial services player EFG Hermes.

Tap or click here to listen to the episode on: Our website | Apple Podcast | Google Podcast | Omny. We’re also available on Spotify, but only for non-MENA accounts. Subscribe to Making It on your podcatcher of choice here.

Another quiet Ramadan night on the airwaves, with only a phone call between Al Kahera Alaan’s Lamees Al Hadidi and Information Minister Osama Heikal worth noting.

On reopening the economy, Heikal said the government is hoping this happens soon despite being careful about specifying a date (watch, runtime: 15:54). Measures designed to prevent the spread of the disease — including a nighttime curfew and the closure of some public places — will remain in effect until the end of Ramadan. We have more in this morning’s What We’re Tracking Today section, above.

Gov’t preparing airports to receive domestic holidaymakers- Heikal: Domestic airlines have been flying with very low utilization rates, but this could change once hotels are reopened soon for domestic tourism, Heikal said. This is important as it could prevent thousands from losing their jobs, he adds. The government has since the start of the outbreak been working to balance health and safety with economic revival, he notes.

The government has deployed just EGP 40 bn of the EGP 100 bn earmarked by the government to protect the economy against the covid-19 pandemic, Finance Minister Mohamed Maait said on Thursday, suggesting it has resources left to help cushion the blow to the economy. Some EGP 5.1 bn has been allocated to the Health Ministry, EGP 5 bn to the Supply Ministry to pay for strategic commodities, EGP 10 bn to the Export Subsidy Fund, and another EGP 10 bn that is being doled out soon to support tourism, aviation, and other vulnerable sectors.

Maait’s EGP 100 bn figure does not include funds earmarked by the Central Bank of Egypt to support the stock exchange through direct investment in equities.

Lower revenues, wider deficit: The crisis has weighed on state revenues during the second half of FY2019-2020, with tax revenues derived from tourism falling off a cliff due to the suspension of air travel. This has caused a EGP 75 bn shortfall in revenues since the beginning of the outbreak, EGP 65 bn of which came through lower-than-expected tax receipts, Maait said.

Background: Maait said last month that the government is effectively writing off the final quarter of the current fiscal year from a revenue perspective, but said that Egypt’s commitment to insulating the economy from the impact of covid-19 is nonetheless “open-ended.” The minister has previously signaled that the government could allocate more funding beyond the existing EGP 100 bn package. The stimulus also includes a tax relief package for businesses that allows companies in several sectors — including aviation, tourism, journalism and media, sports, and manufacturers — to pay income tax in three installments ending 30 June.

Foreign reserves fell in April for the second consecutive month as the central bank honored repatriation requests from foreign investors, the Central Bank of Egypt said in a statement (pdf). Reserves slipped by another USD 3.1 bn during the month to USD 37 bn, having fallen from a peak of USD 45.5 bn in February. “Global markets at large remain under pressure due to the persistence of the covid-19 pandemic which continues to drive portfolio flow reversals from emerging markets … The Egyptian market was no different, and for this reason, the CBE continues to cover the legacy CBE FX repatriation mechanism flows as they exit the market in a seamless manner,” the bank said.

CBE dips into reserves to meet debt repayments, buy strategic goods: The bank spent USD 1.6 bn in meeting external obligations — including a USD 1 bn eurobond that matured last month — and provided an undisclosed sum of FX to back the purchase of strategic commodities.

Portfolio investment in Egyptian t-bills fell by more than 50% during the height of the emerging-market sell-off in March, according to CBE figures (pdf) published Thursday. Investors sold around USD 10.4 bn (EGP 161.3 bn) of EGP t-bills during the month, more than half of the USD 20 bn invested in short-term local currency debt at the end of February. Total portfolio investment (bills + bonds) fell by around 40% in March, according to figures provided last month by Finance Minister Mohamed Maait. The outflows came as investors record sums out of emerging markets in March in a global risk-off.

Low-cost stimulus: Cabinet discusses measures to unlock EGP 65 bn of assets frozen in tax disputes. Businesses may only have to pay a 1% downpayment to unfreeze assets frozen by the Tax Authority as part of unresolved tax disputes if the cabinet economic committee pushes ahead with a plan it discussed last week. The Finance Ministry last month halved to 5% the downpayment required to unlock assets as part of the tax dispute resolution bill ratified on 8 March.

This could see up to EGP 65 bn of frozen assets unlocked and is part of a larger tax settlement initiative that could cover up to 126k taxpayers in dispute with the Tax Authority, state news agency MENA reports, quoting an unnamed banking official. Taxpayers who are in dispute with the taxman will still have to work toward a settlement after making the downpayment and unfreezing their assets.

Other decisions by the economic committee: The committee approved new terms for commercial licenses to companies working with natural gas, especially in petrochemicals and fertilizers, as well as others operating in customs-exempt zones. The Natural Gas Regulatory Authority last March dropped by 22-30% fees for commercial gas transmission, shipping, distribution, and supply licenses.

The bourse is launching today the EGX100 Equal Weight Index (EWI), which allocates constituents an equal weight of 1% on the first day of each quarterly review, according to an EGX press release (pdf). The launch follows the roll out of the EGX70 EWI earlier this year to replace the traditional index and allow tracker funds to better gauge the performance of their portfolios. The bourse issued a guidebook outlining its methodology.

The EGX100 and EGX70 EWI gauges will be reviewed every month, instead of six, similar to what happens with the benchmark EGX30 index. Constituents will be added or removed from the indices based on their monthly turnover.

STARTUP WATCH- CIB’s venture capital arm CVentures has invested in UK-based small business banking and accounting app Countingup, according to an emailed statement (pdf). The investment is part of a GBP 4 mn bridge round led by ING Ventures, Triple Point, and Big Star Ventures, among others. The statement does not disclose the size of CVentures’ contribution in the round.

STARTUP WATCH- Swvl “quietly” raised USD 20 mn in a funding round it closed before the outbreak of the covid-19 pandemic, according to Menabytes. The mass transport app has yet to officially announce or confirm the funding round. The investment is reflected, however, in recently released financial statements from Swedish VC Vostok New Ventures, which co-led Swvl’s record USD 42 mn funding round last June. So far, Swvl has declined to comment.

LEGISLATION WATCH- Supply Ministry pushes legislation to simplify commercial registry: New businesses could soon be registered under one roof under the newly drafted Unified Economic Operators Registry Act, according to a statement carried by state news agency MENA. This bill would merge the five existing registries — the commercial, industrial and commercial agents and mediators registries and the import and export records — into a single register administered by the Supply Ministry’s Internal Trade Development Authority (ITDA), which would take responsibility for registering all new businesses. The legislation will make its way to cabinet within a few days, the statement notes.

Why this is good news: Currently, all types of companies need to be listed in a nationwide commercial registry database and state the names of their active owners and activities as a first step in the set up process. They then have to list their names under separate databases recording the nation’s manufacturers, importers, exporters, or intermediaries depending on the activities specified in commercial records. This makes for a tedious exercise involving several different government agencies. It also requires them to have in hand a lot of documentation to access any type of government service.

LEGISLATION WATCH- El Sisi ratifies four newly approved bills, including covid-19 tax relief, higher income tax exemptions: President Abdel Fattah El Sisi has signed into law four laws recently voted in by parliament, including amendments that raise the income tax exemption threshold. Other laws include allowing pensioners to add the previous five raises to their pensionable pay under the recently ratified Social Security and Pensions Act, a law giving cabinet power to postpone tax payments as covid-19 relief, and changes to the Real Estate Tax Act to exempt unused land. The Official Gazette published the presidential decrees yesterday.

El Sisi approves expanded emergency powers: President Abdel Fattah El Sisi has ratified amendments to the country’s emergency laws granting the presidency new powers over economic, health and security policy, as published in the Official Gazette on Wednesday. The president will now have authority to ban public and private gatherings, suspend schools and universities, and direct the responses of public and private medical organizations to the covid-19 pandemic. The amendments confer power to ban exports of goods, regulate the price of goods and services, and make changes to tax policy, such as extending the deadline for submitting tax returns and allowing taxpayers to pay in installments. The House of Representatives had approved the amendments last month.

The story made headlines in the international press over the weekend: AFP | AP | Human Rights Watch.

US looking to reduce peacekeeping troops in Sinai to trim Department of Defense budget? The Trump administration reportedly wants to cut back on US troops stationed in Sinai as part of an international peacekeeping force mandated by Egypt’s 1979 peace treaty with Israel, the Wall Street Journal reports. The US has contributed troops to the Multinational Force and Observers since its inception in the early 1980s and currently has 400 troops deployed among the 1.1k-strong force. But in a break with long-standing policy, Pentagon officials are considering withdrawal as part of a “cost-cutting review to take stock of U.S. military operations around the world,” the WSJ says.

The US State Department and Israel aren’t on board with the suggested move and the “issue will be raised” between Tel Aviv and Washington, Israeli Energy Minister and security cabinet member Yuval Steinitz said on Friday, according to Reuters. The proposed drawdown comes after a terrorist bombing against Egypt’s military in North Sinai’s Bir El Abd and two retaliatory raids in the peninsula last week left a total of 146 terrorists and 25 members of the Armed Forces dead (here and here).

Could Africa become the next epicenter of the pandemic? The continent’s massively underprepared healthcare systems spells a recipe for disaster if an influx of covid-19 cases hit. Between 29-44 mn could be infected and as many as 83-190k die as a result of covid-19 in a single year if no containment measures are taken, a recent WHO Africa study found according to Reuters. Most African countries are taking some form of preventative measures to curb the spread of the virus, but if these precautions aren't taken more seriously and if rapid investments to the continent’s medical facilities — which have about one intensive care bed and one ventilator for every 100k of its inhabitants — aren’t made, many countries would see their healthcare systems quickly overwhelmed.

Equipment, personnel and testing shortages present some of the greatest challenges to containing the virus: Limited covid-19 testing capabilities and a lack of equipment make the prospect of a pandemic in Africa significantly more frightening than it is in wealthier countries with well-equipped healthcare systems. On average one doctor stands to serve 80k people and there are only 9.8k intensive care beds on the entire continent according to World Bank data, Reuters reports. At the projected height of the outbreak, the continent would need 121k beds at a bare minimum and a Reuters survey has found that an average of 12 covid-19 patients would be in line for every available bed, showing just how vulnerable African populations stand in the face of a full blown outbreak.

No single story is dominating the conversation on Egypt in the foreign press this morning. Here’s a selection of stories getting coverage:

• Egypt’s covid-19 rumor mill is being featured in the Washington Post, with grapevine extracts such as that Egypt has discovered a cure for the virus or that the country’s “heroic intelligence service had neutralized the devious plot.”
• Egyptologists and scientists are criticizing the transfer of four sandstone sphinxes to Tahrir Square from Karnak Temple, saying that the monuments are being exposed to intense air pollution and that their transfer compromises the historic integrity of the temple, according to the Guardian.
• Gravediggers and their families are struggling because of reduced footfall at the City of the Dead, a neighborhood packed with tens of thousands of residents who rely on charity from visitors to make ends meet, Reuters reports.
• The National recaps the threat of economic fallout covid-19 poses to Egypt, citing pressure on small businesses and the tourism industry.

The Egyptian Electricity Transmission Company signed a contract with El Sewedy Electric to implement the 500 kV four-circuit antenna wind power line in the Gulf of Suez, according to Al Mal. The project will cost around EGP 120 mn and take six months to implement.

The contract to build Egypt’s 3 GW electricity interconnection project with Saudi Arabia is reportedly set to be signed this month, Egypt Today reports, quoting an unnamed Electricity Ministry source. Construction will then begin in June, they said. State-owned Egyptian Electricity Transmission Company (EETC) said last month it’s pushing the window for companies bids in the project’s tender by up to 40 days. An initial tender was scrapped after the electric line plan was changed due to Saudi Arabia’s city project Neom.

Phosphate Misr is expected to sign within days the final funding contracts with investors ahead of beginning construction on its USD 1 bn acid phosphate facility in Abu Tartour, according to Al Mal. The facility will be constructed with a Chinese alliance consisting of the Chinese Construction Engineering Company and Wengfu Group, which was awarded the contract last year. Construction is expected to last 30 months, followed by an additional six months of trial operations.

Ibnsina Pharma plans to invest EGP 250-300 mn to set up four new branches this year, IR manager Mohamed Shawky tells Al Mal. The company is also planning to dedicate a portion of its investments to launching a website for online purchases, Shawky said, without providing additional details or a timeframe.

Banque Misr will arrange a EGP 1.4-1.6 bn syndicated loan to Damietta Furniture City to help increase production and exports, Masrawy reports, citing unnamed banking sources. The National Bank of Egypt, the Egyptian Arab Land Bank, and the Export Development Bank are in talks to participate in the loan.

The US Department of State has approved Egypt’s request to purchase USD 2.3 bn of equipment to refurbish 43 Apache attack helicopters, a Defense Security Cooperation Agency statement said on Thursday. The agreement will include the provision of missile warning systems and target designators, as well as US personnel training and contractor engineering.