IMF to stay for tea — for another week?

As talks with the IMF on a USD 12 bn assistance package look set to continue for another week (more below), the government is said to be in talks with the UAE and Saudi Arabia to secure USD 2 bn in deposits within the next month, government sources tell Al Shorouk. The CBE apparently wants to secure USD reserves ahead of taking “more decisive action on the devaluation.” These talks have been ongoing for the last few weeks, the source added. This isn’t new money, though: Do the math on last month’s reserve report, and it’s clear that the USD 2 bn UAE deposit announced in April and expected in May never arrived. The Emirati deposit would have topped reserves back up to USD 17.5 bn after repaying USD 1 bn to Qatar, USD 714 mn to the Paris Club and more than USD 500 mn split between Libya and back-dues owed by EGPC. We’re down to about 2.8 months of import cover.

Enterprise loves Brazil. Maybe not the rowing / sailing / open water swim course in Brazil, but the open-mindedness of a people who full-throatedly sided with Egypt’s beach volleyball team, chanting “Egypt, Egypt, Egypt” just because “today, Egypt needed our support.” Reuters has the story.

Egypt’s men handball team beat four time European and world champions Sweden, 26-25 at the Rio Olympics, Ahram Online reported early this morning. Egypt also defeated Cuba 3-0 Pool B in Men’s Volleyball.

Ahram Online’s Rio 2016 portal is the best English-language resource of which we’re aware for updates on how Egyptian athletes are faring in Brazil.

Investment banks have until Thursday, 11 August at 2:00 PM to submit proposals for Egypt’s USD-denominated bond issue in 2016, advertised for in the Financial Times last week. The Finance Ministry issued a statement on Tuesday confirming the date and refuting rumors that it had closed the tender and that it had begun studying proposals, AMAY reports.

The IMF delegation may stay another week to try and reach an agreement on a timeline for devaluation,according to a senior government official speaking to Youm7. The central bank has been insisting to the delegation that it already has a set timeline to devalue the EGP before the talks began, said the source, implying that the IMF might want the timeline moved forward. Talks aimed at having the Ismail government agree to cut fuel subsidies are also holding up an agreement, with Egyptian negotiators said to be trying to protect subsidies for the lowest income earners. The source added that the USD 2 bn decline in Egypt’s foreign reserves last month to USD 15.5 bn has put negotiators in a tight spot in the talks. We’re hoping the nice folks at the IMF are enjoying our hospitality and not feeling like this (watch, run time: 0:08).

The central bank kept the exchange rate stable at EGP 8.78 per USD 1 at yesterday’s weekly FX auction, where it sold USD 117.9 mn. The funds were earmarked again to clear a backlog of pharma and infant formula imports, Al Mal writes, quoting a banking source. The paper adds that, according to its sources, the parallel market has the exchange rate at EGP 12.60 per USD 1 whereas Reuters cites the rate at EGP 12.65 per USD 1.

Black market players could face additional jail time: The House of Representatives zeroed in on the parallel market yesterday, voting extend the minimum jail term for anyone convicted of “manipulating the FX market” or selling foreign currency in the parallel market. The amendments to the Banking Act (law 88 of 2003), recommended by the CBE, will see jail terms rise to 3-10 years from a previous minimum of one year and fines capped at EGP 5 mn, Al Masry Al Youm reported. The amendments target articles 113, 117, and 116 of the law, which restrict transfers abroad of FX to CBE-certified banks, require banks and FX bureaus to submit periodical reports to the CBE on FX activity, and enforce declarations of FX by travellers. The amendments to the banking act have been picked up by Bloomberg and Reuters in English.

Abdel Aal didn’t try to shutter exchange bureaus? Meanwhile, House Economics Committee Chairman Ali El Moselhy denied widespread news reports that House Speaker Ali Abdel Aal had attempted to introduce a law that would kill FX bureau activities, Al Mal reports. He added that discussions did focus on “criminalizing certain transactions by some FX exchanges,” but did not specify what those were. Some 47 FX exchanges have been shuttered on allegations of trading in the parallel market.

Meanwhile, Federation of Egyptian Chambers of Commerce head Ahmed El Wakeel rejects the notion that the CBE’s crackdown on FX offices helped stabilize the parallel market rate. He continued to blame statements by CBE Governor Tarek Amer on FX for the EGP’s slide over the past month, urging Amer to adopt back a full float of the EGP, Al Mal reports.

State-owned banking and oil companies will list in December and January, said Investment Minister Dalia Khorshid, who noted that the agreement between the EGX and Nasdaq Dubai would allow dual listing of shares of state-owned companies that enter the IPO program Al Borsa reports. Shares could be offered on other foreign bourses, with stakes as high as 45% potentially up for grabs, the minister said. Power companies will listed in the second phase of the 3-5 year program which should net the state USD 10 bn in revenues. As we noted earlier this month, up to eight oil companies and possibly three banks including Banque du Caire will list. NI Capital is spearheading the IPO program for the state, Khorshid said.

That said, we’re not holding our breath. We have difficulty imagining a scenario in which anything more than a literal listing (as opposed to an offering of equity) takes place by December or January given there have been no public reports of advisors being hired — and given the uncertainty in the market about when the Ismail government might embrace devaluation. And that’s without consideration to the key question: Whether there’s appetite and liquidity to support multiple simultaneous offerings. The IPO of state-owned enterprises has previously been billed as a measure to “revitalize domestic capital markets,” making it politically challenging for the administration to make the first listings anywhere other than EGX.

Khorshid also outlined her ministry’s agenda in the coming period: Khorshid is also in talks with the Finance Ministry to bring back legislation on free zones and investment incentives. The Investment Ministry also plans to introduce legislation governing sovereign wealth funds, she said. The ministry plans to form a JV with the UAE government soon to run the UAE-Egyptian Investment Fund, in addition to amending the framework agreement for the SAR 60 bn Saudi-Egyptian Investment Fund. Khorshid also said that she is in talks with China’s industrial city operator, China Fortune Land Development (CFLD), which she claims is interested in investing up to USD 20 bn in Egypt over the next 10 years. Khorshid said the measures should net the state USD 10 bn in direct foreign investment this year alone.

The National Telecommunications Regulatory Authority (NTRA) has caved-in to demands that additional frequencies be offered to mobile network operators after 4G licenses are tendered. An NTRA source tells Al Borsa that the regulator has opened talks with other government agencies to free frequencies for the 4G spectrums, expecting them to be made available in the coming months. NTRA officials have also reportedly addressed concerns raised by Orange Egypt regarding service levels, sources from the CIT Ministry told Al Mal. The regulator will also meet with representatives from Vodafone Egypt and Etisalat Misr to discuss their concerns. As we had earlier reported, the NTRA had refused to back down from its requirement that a portion of 4G license fees be paid in USD; it had also refused to make more 4G spectrum available to MNOs. The breakthrough in talks came just as the 48 hour “take it or leave it” ultimatum handed to network operators expired yesterday.

The Ismail cabinet is set to officially announce this week a standard feed-in-tariff rate of EGP 0.92/kWh for waste-to-energy projects, sources tell Al Borsa. The rate will be pegged to inflation. Under the 20-year agreements, investors will be offered land under a usufruct framework, the source added. EGP 0.42/kWh will be paid by the Electricity Ministry, while the ministries of environment and local administration will cover the rest. Five companies have reportedly entered the bidding for these project. Cabinet had approved the plan in November, as we previously noted. While the source notes similarities between this framework and the solar energy FiT agreements, it did not mention whether parties to the agreements would have recourse to international arbitration. Conflict over international vs. domestic arbitration has derailed phase one of the FiT program for solar power.

The Electricity Ministry is adding a “service charge” to consumers’ power bills in 2016-17 which will be applied retroactively as of last July (because it isn’t enough that regular bills are already going up). The fee is in the range of EGP 1-20 per month for residential bills and EGP 5-25 for commercial bills, varying based on consumption tier. Minister Mohamed Shaker told Al Mal that the ministry will run a call center starting in September. Between price hikes and “service” charges, we wouldn’t want to the on the receiving end of consumer calls.

China State Construction Engineering Corporation (CSCEC) has agreed to sign a USD 3 bn agreement to build the new administrative capital’s government block, Al Borsa reports. The company will sign a final agreement before the end of the year, said Housing Minister Moustafa Madbouly. CSCEC had signed a series of MoUs with governmental and private-sector entities worth c USD 45bn in January for new Administrative Capital projects. Housing Minister Moustafa Madbouly said the ministry is working with the company towards transforming more of the MoUs into actionable projects. Anonymous sources added that the lag is due to negotiations concerning the terms of the loan needed to finance the projects.

** Earnings watch: ‘Tis still the season, folks. Among the companies reporting earnings yesterday:

• Edita’s consolidated 2Q2016 net profit after minority fell 37.9% y-o-y to EGP 48.1 mn, while revenues grew 6.9% y-o-y to EGP 550.2 mn, according to the company’s earnings release (pdf). We’ll have more on Edita’s earnings after their conference call.
• Palm Hills Development reported a 75% decline in net earnings after tax to EGP 108 mn on revenues of EGP 1.1 bn for 2Q2016. (After minority interest, the earnings figure is down 85% to EGP 64 mn.) The company’s earnings are based on a new revenue recognition policy. Skip to page 8 of their filing and go down the columns marked “R.”
• Emaar Misr’s net income rose to c EGP 691 mn during 1H16 compared to c EGP 522 mn recorded in 1H15, according to an EGX statement.

MOVES- Hisham Badawy was appointed the new head of the state’s top audit authority the Central Auditing Agency by President Abdel Fattah El Sisi on Tuesday, Ahram Online reported. Badawy was previously approved by the House of Representatives for the post in June, and replaces Hisham Geneina, who was charged for the dissemination of false charges over his claims on the size of state corruption. Badawy has previously served as prosecutor-general for state security prosecution from 2005-2012 and was later appointed head of the Cairo Court of Appeals. Badawy was previously rumored to be shortlisted for the position of prosecutor general following the assassination of Hisham Barakat.

House gags police: The House of Representatives passed yesterday an amendment to the Police Services Act that “bar police officers from providing information or publishing any documents, reports or photos related to their work without written authorization from the interior ministry,” Reuters reports. Members of the police service found to have violated the new provisions face jail time and fines of EGP 20k.

China, ‘the world’s energy engine,’ is slowing: China’s daily crude imports dropped to its lowest point in six months in July, down to just 7.35 mn barrels a day, Bloomberg reported on Tuesday. Imports of coal fell 2.5% from June, while natural gas fell by 13% from the previous month. Despite decreasing production and investment, world oil markets continue to face a persistent supply glut keeping prices depressed, and China’s diminished appetite will only make it that much harder to work through excess inventory. Consumption of coal is projected to drop a further 3.4% this year amid slowing industrial activity, Bloomberg reported.

Egypt’s prosecutors should drop the case against former corruption auditor Hisham Geneina, writes Human Rights Watch’s deputy Middle East and North Africa director Nadim Houry, saying the case “violates the right to free speech and harms efforts to combat corruption.”

Egyptian women top the world in “abusing and beating their husbands,” Renad Ghanem writes for Saudi Gazette, citing alleged ‘UN crime statistics.’ Ghanem says: “According to the data, wives don’t only use their hands in beating their husbands, but use implements such as pins, belts, weapons, kitchen tools and shoes, with some even using sleeping pills to be able to beat and burn their husbands.”

<rant>The Saudi Gazette “report” is the kind of defamatory garbage you might expect to hear on Egyptian talk radio, presented as fact-free entertainment while attempting to trivialize domestic violence and establish a false equivalence on violence between spouses. The author makes no mention of which United Nations agency is being cited, nor does it give the name or publication date of any study. The United Nations Office on [illicit substances] and Crime does not track domestic violence. However, as we noted at the beginning of last month, Egypt’s Central Agency for Public Mobilization and Statistics, the National Council of Women and the United Nations Fund for Population Agency launched Egypt’s Economic Cost of Gender Based Violence Survey (pdf, English, Arabic), the first such study of its kind in the region. The study found 7.8 mn Egyptian women faced violence from men in 2015, with 5.6 mn of those facing violence from their husband or fiancé.

Domestic violence cost Egypt EGP 2.2-6.2 last year in the form of lost wages and other costs arising after women missed work after suffering domestic violence.</rant>

A new fashion festival will launch in Egypt in September and will cross Arab countries as a means to revive the ailing tourism industry, festival coordinator Ghada Al Sherbini told Al-Monitor. The festival will host renowned fashion designers, and is attempting to attract international interest to aid a neglected fashion industry, she adds.

Al Masry Al Youm Chairman Abdel Moneim Saeed writes on Egypt’s ability to take action to implement reforms necessary to land USD 12 bn in IMF funding for AMAY. The IMF loan will require a change of human behaviour if it will do anything besides put Egypt further in debt, he says.

Al Watan’s Mahmoud Khalil is urging the government not pursue the IMF loan. His reasoning is twofold: The country needs a liquidity shield before it can devalue the national currency, and that the IMF is just another American tool to destabilize Egypt. While Khalil barely acknowledges that the loan would improve investment in the country, he does not factor in how the loan would help cover reserves shortfalls not to mention the USD 2-3 bn Eurobond issuance that will come with it.

Khalil fits right in: Al Watan has become a wee bit anti-American of late. Columnist Emad El Din Adib attacked what he called the hypocrisy of US policy on Syria, while Sahar Ga’ara flat-out calls US President Barack Obama a terrorist.

Al Ahram Editor Farouk Goweda pens a piece asking why a terrorist attack would target former Grand Mufti Ali Gomaa, while government-affiliated Makram Mohamed Ahmed hits on the same theme in a separate piece, also for Al Ahram.

Why is Minya such a hotbed for sectarian violence? Given that Minya was the setting for 10 incidents of sectarian incidents in just the past seven months, according to a report from the Egyptian Initiative for Personal Rights, Heba Afify tries to get to the root causes of what dynamic is at play. Aside from being one of the “strongholds of the Jama’a al Islamiya since its foundation in the 1970s,” and other various Islamist groups, Afify explains the typical chain of events, quoting a Minya-based activist: “Most sectarian incidents starts with a personal altercation or criminal act and then, with a delay in security responses and because of widespread intolerance in the area, people take the side of those who belong to their group, which is more a reflection of tribalism than it is of religious fanaticism.” (Read Why do sectarian tensions run high in Minya?)

Egyptians in Rio: From the required “bikinis vs. veil” beach volleyball shots to archers, wrestlers and rowers, Ahram Online has a very nice gallery of photos of our athletes competing in Rio yesterday.

WTF Am I Watching — Donald Trump said during a rally on Tuesday that gun rights advocates could “stop” Hillary Clinton, in what appeared to be a veiled incitement for her assassination. The Trump campaign has already denied this was the intent of his statement. Our readers may decide for themselves: Watch, running time: 15 seconds. The New York Times has more.

Lawyers for Irish-Egyptian dual national Ibrahim Halawa are preparing to lodge a direct appeal to President Abdel Fattah El Sisi for Halawa’s release — with the reported backing of the Irish government, the Irish Times reported early this morning. The application will made in accordance with presidential decree law 140, which allows for the extradition of foreign nationals from Egypt to their home country, in this case, Ireland. The move follows a rejection by the House of Representatives of a resolution by the Irish parliament calling for Halawa’s release.

Shoukry, MPs critical of UK guidance on asylum for Brotherhood: Guidance (pdf) published by the UK Home Office outlining the conditions for potential asylum requests by prominent members and supporters of the Egyptian Muslim Brotherhood is “not positive” for relations between Egypt and the UK, according to a statement by Foreign Minister Sameh Shoukry on Tuesday, Ahram Online reported. The document’s assertions that prominent members and supporters of the Brotherhood were being targeted and that the judiciary was partial are “unfounded,” Shoukry added. A number of members of the House of Representatives also aired their grievances on the matter, with independent Rep. Abdel Rehim Ali saying “They [the UK] said last December that links to the Muslim Brotherhood should be considered a possible indicator of extremism, and now after eight months they say members of the group, including supporters and journalists, can seek political asylum in the UK.”

President Abdel Fattah El Sisi met with Cyprus’ Minister of Foreign Affairs Ioannis Kasoulides for talks on energy, maritime transportation and tourism. according to an e-mailed statement from Ittihadiya.

The Suez Canal Authority has received three international offers to build ship maintenance and supply facilities at its ports, chairman Mohab Mamish said, according to a report from Al Borsa. The offers came from unnamed companies in the UAE, Denmark, China, and Kuwait. President El Sisi apparently sanctioned the project. Mamish added that the canal’s USD-denominated revenues should grow by 5% during 2016 to record USD 5.4 bn by the end of the year. As we noted earlier this week, the canal’s USD-denominated revenues grew by 4% (13% in EGP) terms during 1H16 despite a slowdown in global trade. The canal has been offering special discounts to lure additional traffic.

Indian petrochemicals manufacturer TCI Sanmar are increasing their domestic investments by USD 200 mn to USD 1.5 bn as part of an expansion plan that ends in April 2017, company Director P. S. Jayaraman told Al Mal. The expansion plan will double the company’s annual production of polyvinyl chloride (PVC) to 400k tonnes, increase sodium hydroxide production to 275k tonnes, and produce 135k tonnes of calcium chloride, he added.

100 new factories will be built as part of the first phase development of the new plastic industrial complex in Alexandria, ingeniously named Plastic City, Chemicals and Fertilizers Export Council head Khaled Abou El Makarem tells Ahram Gate. Older factories will be upgraded as well, said Abou El Makarem. Abou El Makarem expects Plastic City to attract investments worth EGP 100 mn and generate production worth EGP 40 mn each month, with 50% of the latter exported to Arab and African markets.

The National Health Insurance Authority signed a protocol with five charity organisations to provide funding for cochlear implant surgeries for children nationwide, Al Ahram reported. As per the agreement, the total value of which is undisclosed, the Authority will provide the cochlear implants whereas the charity organisations will finance the remainder of the operations’ costs. The protocol aims to resolve the backlog of nationally-insured children awaiting cochlear implants and spread part of the operations’ cost, which are estimated to cost EGP 120k-160k each. A Health Ministry advisor tells Al Borsa there are 7,000 children awaiting cochlear implants currently.

The Taba Real Estate Company is building a housing compound west of Alexandria at a total cost of EGP 100 mn, company manager Nasser Zidan told Al Borsa. The project will be built over an area of four feddans and includes 180 homes, he added. Construction will commence within a month, while the project is expected to be completed within three and a half years, said Zidan.

Car assemblers, including GB Auto, have reduced output due to decreased demand, GB Auto Chairman Raouf Ghabbour told Al Mal. Ghabbour said the decreased demand is caused by the EGP devaluation, which drove up prices. As input prices continue to increase as well, he expects car sales to fall by 10% this year.

Truck sales declined 27.3% y-o-y in 1H16 to c19,000 trucks, down from 26,000 in 1H15. Pick-up truck sales fell by 15.1% to record c1,100 from 1,300 last year. Over to buses, where Suzuki and Chevrolet’s grew their market shares, reaching 30.5% and 21.5% respectively up from 21.5% and 17% in 1H15, placing them at first and second largest in the sector. An official told Al Mal that the slowdown in the tourism sector is largely to blame for the fall in demand for buses and trucks in recent months. As we noted yesterday, bus sales fell by 29.7% during the same period to 11,800 vehicles, down from c16,700 vehicles in 1H15. Fortunately, that includes microbuses.

Mowasalat Misr are investing EGP 300 mn into the domestic market over the coming three years, including EGP 79 mn this fiscal year, Chairman Hisham Taha told Al Mal. The company operates 90 busses over five transportation lines within the greater Cairo area, and is in talks with the Transportation Ministry to increase the lines and vehicles, he said. As we had earlier reported, Abu Dhabi-based Emirates National Group (ENG) acquired 70% of Egyptian Advanced Company for Public Transportation through a capital increase from EGP 5 mn to EGP 32 mn, and changed its name to Mowasalat Misr.

EU experts assessing the 1.5 mn feddan desert reclamation project found that the project requires more extensive research before making a final decision on investment, even though it is financially feasible, Al Mal reports. The team focused on four out of the nine areas that are part of the reclamation project, including Toushka, Siwa, West Minya, and El Moghra. The first round of investment is estimated at EUR 5.49 bn, according to the studies, while the annual operation cost is EUR 1.80 bn. Annual agricultural yield is estimated at 10.1 mn tonnes, while sales from crops are estimated at EUR 2.15 bn. The study also recommended reducing the concession period to 25 years from 49 for foreign investors, as initial capital investments will “wear off” after 25 years, especially renewable energy systems. Ultimately, the study believes the concession period will make no significant impact on investor interest.

A court has ordered officials to investigate allegations that Mohamed El-Beltagy, a senior leaders of the banned Muslim Brotherhood, was tortured in custody by a number of top police officers, Ahram Online reported.

Surprising no one, tourist arrivals were down 50% year-on-year in the first half, official figures show.

The first gold medal to be awarded for women’s rugby sevens in the history of Olympics was won by Australia on Monday. The Aussies beat New Zealand 24-17 in the final (runtime 01:00). The men’s competition began yesterday.