Wednesday, 12 November 2014

Ramez: Currency black market dead in 1 year • Lamees El-Hadidy wages war on tuk-tuks • Egypt + Iran “next great emerging markets” • Cabinet debates electoral law today • China + US strike climate deal • Egypt seeks coal power • EGP 5.9 bn rail revamp

WHAT WE’RE TRACKING TODAY

The arrival of the IMF team to begin Article IV consultation was moved to today from its originally-scheduled start date of yesterday, according to comments yesterday by David Thorne, senior advisor to the US Secretary of State.

Cabinet is scheduled to begin review today of the draft elections lawthat will carve out new electoral districts for the mooted March 2015 parliamentary poll.

Telecom Egypt is set to release its 9M results today.

The United States and China have struck a climate change agreement, pledging to reduce their carbon emissions to 26-28% below 2005 levels by 2025. Chinese President Xi Jinping said China will draw 20% of its power from non-fossil sources by 2030, a development that could have wide implications on the economics of renewable energy projects. The announcement was made just as we were about to dispatch today’s Enterprise Morning Meeting. More on this front in the days ahead.

LAST NIGHT’S TALK SHOWS

Al Nahar’s Khaled Mahmoud hosted Ahmad Abu Hashima, CEO ofEgyptian Steel. Abu Hashima spoke extensively about the private sector’s role in supporting the government, whether its through donations to Tahya Misr or by investing.

“God mentioned this country in the Qur’an, five times, I am sure there is something sacred about it. We have been through a lot during the past four years and yet here we are talking on television. We are still eating and drinking and getting on with our lives and that in itself is a great achievement,” said Abu Hashima.

“I am confident that the new investment law will make life much easier for all of us as investors. The government has been moving a bit slowly. Their pace does not match the pace of the President. It’s almost like he’s sprinting and they can’t keep up with him, but now everyone’s feeling the pressure to accelerate before the March deadline,” he said.

Abu Hashima would also like to see the appointment of a deputy PM to handle economic affairs, a post he thinks would relieve Prime Minister Ibrahim Mehleb of considerable burden and help ensure investors have “clarity and transparency.”

Mohamed Sherdy interviewed Minister of Investment Ashraf Salman about the establishment of the long-awaited One-Stop Shop: “This is an idea that has been tossed around since 2002. Mahmoud Mohieldin tried to establish the One-Stop Shop during his time as Minister of Investment, but he never managed to pull it off properly because of resistance to change and corruption on the part of the various entities that have benefited from the old system,” said Salman. “We also lacked the proper legislation to make it happen.”

As matters currently stand, Salman said, “What we have is a One Stop Shop that includes representatives from all the different government entities who then take the paperwork to various ministries and governorates to have them approve, which takes a lot of time and a lot of followup from the investor. It hasn’t really facilitated anything. Investors call it the ‘One-More-Stop Shop.’”
Salman claims that things will be different this time around because we have reached a crisis situation that is forcing us to change. The change will start with the new investment law that is currently being drafted: “Once we have the proper legislation, we will be able to have one window and one entity — GAFI — that approves all paperwork.”

Lamees El Hadidy apparently dislikes tuk-tuks. In a phone call with Minister of Trade and Industry Mounir Fakhry Abdel Nour, she asked for an explanation as to why the decision to ban the three-wheeled vehicles has been reversed. Abdel Nour explained that the decision to ban the import of components for local assembly was initially made in the belief that tuk-tuks posed a security threat, and that the decision to reverse the prohibition came from the Ministry of Interior. He also explained the importance of the things to Egypt’s rural communities.

“I think that we can address the security issue if we make sure that the vehicles are licensed,” said Abdel Nour.

El Hadidy was not convinced and called on the Ministry of Interior to provide a better explanation: “Do you really believe tuk-tuks are now safe? We have no idea who is driving these vehicles, in many instances they are juvenile delinquents and they are committing crimes. There has to be an alternative to this vehicle of death,” said El Hadidy.

El Hadidy also interviewed Wael Amin, chief of ITWorx, the regional software company, about his experience as a successful entrepreneur. Amin was among a group of young Egyptian entrepreneurs who met with President Abdelfattah El-Sisi yesterday.

“The President wanted our recommendation on how the government can help encourage entrepreneurship in Egypt. We will be forming small groups to address specific problems so that we can present recommendations in each of our specific fields. For example, I will focus my recommendation on education and looking into ways that technology solutions can help develop public education,” said Amin.

Ibrahim Eissa also discussed the topic of entrepreneurship last night and commended El-Sisi for making entrepreneurship one of his priorities.

SPEED ROUND

The EGX30 index climbed 0.35% yesterday to 9,493 points on turnover of EGP 803 mn, about 11% above the 90-day average. KSA was down 0.3%, Kuwait gained 08%, Qatar shed 0.2%, DFM was up 0.2%, and ADX added 0.5%.

Internationally, just about everything was up except for oil in trading yesterday as the Dow and S&P 500 both hit intraday highs, European stocks edged up on stronger corporate results, and the Nikkei gained 2.1% on speculation a tax hike will be postponed — and a snap election called. The dollar gained ground against the yen yesterday, while the euro edged up from the two-year low it hit last week. Gold was up fractionally, while Brent crude futures again lost ground.

“Opinion: Egypt, Iran are the next great emerging markets”, reads the headline over a take in MarketWatch by Jerusalem-based Amotz Asa-El, former executive editor of the Jerusalem Post turned analyst and columnist for MarketWatch. Although he gets Arabtec’s housing project wrong (in our view — we see the project as now on life support, at best), the piece is on the balance very positive and will help with what the PR types call “third-party validation” of what’s coming out of Egypt these days. His conclusion, after running through his views on growth catalysts and ongoing reforms: “Considering their shortages, locations, and large populations, the Egyptian and Iranian economies will soon start growing rapidly, using their veteran stock markets, attracting industrial multinationals, and eventually succeeding yesteryear’s Asian tigers as the global economy’s next big thing. Hopefully, their bleeding neighbors, from Libya and Yemen to Iraq and Syria — will watch, envy, and ultimately follow suit.” (Read)

Our suspicion that Arabtec may be a dead letter isn’t shared by the WSJ, which carries today a piece by correspondent Asa Fitch writing on Aabar Investments buying out the former Arabtec CEO personal stake in Arabtec for USD 963 mn. The story opens and closes with mentions of the 1-mn unit Arabtec housing project in Egypt and notes “Aabar recently bought a 5.1% stake in Egypt’s Palm Hills Development, a move that appeared to raise the potential for Arabtec to gain an even bigger foothold there.”

FT Cairo correspondent Borzou Daragahi is interviewed about what it means that ABM threw its lot in with Daesh in an FT podcast out yesterday. Daragahi thinks this is just the first what could be multiple groups around the world allying themselves with Daesh and says there are signs “groups loyal to Isis are spreading in Libya … in Algeria as well. It is possible it could spread to other parts of Egypt.” It’s not a question of the groups being under Daesh control, but rather “wannabes … who want Isis support. These are signs of exchange of expertise and fighters, but not a command structure.” Any move by ABM to extend its attacks beyond police and the military to attack civilian and tourist targets would have a “clear economic impact,” he concludes. (Listen — in your browser or on a podcast app)

The AP’s Sarah El-Deeb has a take on the US trade delegation, quoting US Chamber of Commerce’s Gregori Lebedev as saying: “I think the size of the delegation reflects the fact there was a prospect of change and reform and let’s go see for ourselves what those prospects are because we would like to be a part of that solution if we can and we certainly want to be part of (Egypt’s) long term growth.” Added another US Chamber official: “‘Business likes to get in the act early,’ he said, adding that visit hopes to boost American investment in Egypt, which now stands at over $10 billion, at a time when its government took drastic and much awaited economic reforms such as cutting fuel subsidies.”

The president’s signal that parliamentary elections could be held in March has been widely picked up by global media thanks to this Reuters report.

A car bomb outside a fast-food restaurant in the North Sinai town of Arish wounded 10 people late on Tuesday when it exploded as security forces were evacuating a heavily populated area, security and medical sources said. There was no immediate claim of responsibility for the attack. (Read)

The presidency said yesterday there was no attempt on the life of President Abdelfattah El-Sisi in October. The question was raised by a report in Saudi media, according to a brief report by Ahram Online.

Zahi Hawass is apparently facing charges once more, it having been alleged this time around that he had helped smuggle antiquities out of the country. (Read)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Egypt in talks with investors over more coal-fired power plants
Reuters | 11 Nov 2014
Egypt is in talks with several big investors about building coal-fired power plants as it works to diversify its sources of generation amid the country’s worst energy crisis in decades, the electricity minister said on Tuesday. Mohamed Shaker told a visiting delegation of American business executives that expanding the use of both coal and renewables such as wind and solar was key to the government’s effort to end power cuts that regularly hit homes and shut down production lines last summer. Shaker said the talks with investors have been underway for the past three to four months and “were going very well”. Shaker said the government wanted to cut its reliance on natural gas and fuel oil for power generation from an unsustainable 90 percent to 62 percent by fiscal year 2020/21. (Read)

Al-Sobky: 10 companies submitted bids on new and renewable energy tender
Egyptian People | 11 Nov 2014
Ten companies submitted bids on tenders to build new and renewable energy plants since the tender offering last month, according to Mohamed Al-Sobky the Head of the Egyptian New and Renewable Energy Authority (NREA). The Ministry said it is doing its best to lay down the technical and legislative foundation necessary to attract investors in the new and renewable energy sector. (Read in Arabic)

OIL & GAS

Cyprus FM: Cairo summit an important first step
Cyprus Mail | 10 Nov 2014
The declaration signed at the Cairo summit is envisioned as an outline agreement between Cyprus, Greece and Egypt that can lead to a commercial deal involving hydrocarbons. That was the clearest-yet description of the substance of the Cairo confab, as explained by Foreign Minister Ioannis Kasoulides, who had accompanied the Cypriot President in Egypt. Cypriot government spokesperson Nicos Christodoulides said the foreign ministers of the three Mediterranean nations have been charged with fleshing out the content of the Cairo proclamation. On 24 November the energy ministers of the three countries will be holding “more specific talks” in Cyprus, and regular contacts would follow on a trilateral level, said Christodoulides. Egyptian President Abdel Fattah al-Sisi has accepted an invitation by President Nicos Anastasiades to pay an official visit to Cyprus before year’s end. According to Christodoulides, a tripartite summit of the heads of state of Cyprus, Israel and Greece was also on the cards: “We will be able to speak more on this following the [Cypriot] President’s visit to Jerusalem on 2 December.”

Cypriot newspaper Politis writes that the governments of Cyprus, Greece and Egypt are laying the groundwork for the signing of a MoU on matters relating to hydrocarbons, the objective being to put ink on paper during Sisi’s visit here, likely in early December. The MoU’s purpose, according to the daily, is among others to provide the political backbone to talks now underway between the Cyprus Hydrocarbons Company and BG Egypt for the potential sale of Cypriot natural gas to BG’s LNG terminal in Idku, Egypt. Regarding Ankara’s objections to Cyprus’ gas exploration in its Exclusive Economic Zone (EEZ), the chief diplomat reiterated that Nicosia would not cave in. “We cannot take into account Turkey’s demands, because her demands will not cease. For example, today Turkey wants ENI to stop drilling, tomorrow that we not sell natural gas to Egypt, and the day after who knows what else.” (Read)

Egypt Kuwait Holding announces gas field purchase north of Suez
Daily News Egypt | 11 Nov 2014
The Egypt Kuwait Holding (EKH) company announced the purchase of a gas field from a French company north of Suez, according to a cabinet statement on Sunday evening. Cabinet Spokesperson Hossam Al-Qaweesh said that during a meeting with Prime Minister Ibrahim Mehleb on Sunday, the company confirmed it increase investments during the coming phase and expanding into new areas. The company also added that it has plans to implement projects to produce electricity from new and renewable energy. EKH management did not disclose details about the field it purchased or its value, but said it will work to increase the amount of gas produced from that field. Last month, EKH said that Mehleb intervened in a problem they and 21 other companies faced in obtaining permissions for capital increases. The company said that “the prime minister solved the problem in four hours,” the Daily News reprots. (Read)

EFG Hermes expects oil prices to reach USD 85 per barrel in 4Q14
Al Borsa | 09 Nov 2014
EFG expects lower oil prices to prevail this year with the oil price averaging USD 85 per barrel in 4Q2014, and USD 101.5 for the year as a whole. “Some guidance—including through OPEC production cuts next year—is likely to provide modest support, lifting the average oil price to USD 90 in 2015,” Al-Borsa quoed EFG as saying. Egypt will benefit, as it recently has become a net energy importer, though it has been increasingly exporting crude oil in recent years to cover for shortfalls in natural gas exports. (Read in Arabic)

EGPC expects boom in crude and condensate production levels
Al Mal | 10 Nov 2014
Egypt’s crude and condensate production is expected to jump from current levels of 680,000 barrels daily to 1 million barrels daily, according to Mohamed Younis, Vice President of the Egyptian General Petroleum Corporation (EGPC). Younis explained that reaching the targeted level is possible based on promising studies of alternative measures of extracting crude, condensates and gas in Sinai, Suez and the Western Desert given that the necessary investments are available. The government is therefore endeavoring to pay back its foreign partners late arrears to encourage further investments. (Read in Arabic)

BASIC MATERIALS / COMMODITIES

Italcementi posts 3Q14 net profit of EUR 15.8 mln
Italcementi Press Release | 10 Nov 2014
In the third quarter of the year, assisted by an improvement in cement sales, Group revenue amounted to EUR 1,067.3 million euro, up 0.7% from the year-earlier period. The quarter saw a return to profit, for EUR 15.8 million euro (compared with a loss of EUR 36.9 million euro), despite the market contraction in France and increase in operating expenses in Egypt, which led to a decrease of 5.5% in recurring EBITDA to EUR 164.4 million euro. In the nine months from January to September, revenue contracted by 3.1% to EUR 3,115.7 million euro, largely due to the exchange-rate effect and a negative sales price dynamic in the Eurozone. Nevertheless, the efficiency measures adopted during the year and steady performance in Egypt and Asia kept recurring EBITDA in line with the year-earlier period. Net income for the period was negative at -63.8 million euro, with an improvement of approximately EUR 16 million euro against the prior year. (Read in PDF)

Delta Sugar net income roughly flat y-o-y in 9M
Al Borsa | 11 Nov 2014
Delta Sugar company reported a net profit of EGP 182.1 mn for 9M14 against EGP 180.5 mn in the same period last year. (Read in Arabic)

MANUFACTURING

Egyptian exports fall 12.52% m-o-m
Daily News Egypt | 11 Nov 2014
The total value of Egyptian exports in October stood at reached USD 1.309 bn, a 12.52% decrease compared to September levels of c. USD 1.497 bn, the Ministry of Industry and Foreign Trade’s monthly report shows, according to DNE. Exports for 10M14 stood at USD 18.218 bn, a gain of 1.29% y-o-y. Egypt’s primary exports include furniture, leather, agricultural products, engineering and electrical products, foods, readymade garments, and handicrafts, according to the report. [Editor’s Note: We’re digging into the details and will have more tomorrow.] (Read)

REAL ESTATE

SODIC reports 37% rise in 9M net profit
Reuters | 11 Nov 2014
Property developer SODIC reported a 37.4% rise in 9M net profit on Tuesday. SODIC, also known as Sixth of October Development and Investment Co., said net profit rose to EGP 109.71 million Egyptian pounds (USD 15.34 million) from EGP 79.86 million a year earlier. (Read)

TELECOMS

Vodafone Egypt reports 9M revenue of EGP 9 billion; number of subscribers drops to 39.4 million
Al Borsa | 11 Nov 2014
Vodafone Egypt recorded EGP 3 billion in revenues during the third quarter of the year, the same amount of revenues recorded during the second quarter, thus revenues for the nine months period amounted to EGP 9 billion. The Local Mobile Segment reported EGP 1.8 billion in net profit during the nine month period of the year 2014. The number of subscribers dropped back to 39.4 million, representing a loss of 2.3 million subscribers during the third quarter. (Read in Arabic)

HEALTHCARE

Nassef Sawiris: We will invest EGP 350 mn in hospital upgrades
Youm7 | 11 Nov 2014
In a one-on-one interview with Youm7, OCI NV chief Nassef Sawiriss is quoted as saying the company will invest EGP 350 million in the revamping and expansion of several hospitals across Egypt with the target of increasing their capacity to 1,000 beds within the coming 18 months. Sawiris also reiterated his company’s commitment to an EGP 25 billion investment in Egypt’s power sector through the development of a 2000-3000 MW clean-coal fired power plant in the Red Sea governorate. In addition, Sawiris also highlighted that OCI has signed several agreements with the Arab Contractors to form a consortium that will undertake development projects on the Suez Canal Corridor, including the EGP 1 billion tunnels linking the cities of Ismailia and Port Said. (Read in Arabic)

BANKING

Egypt’s currency black market to disappear within a year: CBE governor
Ahram Online | 11 Nov 2014
Egypt’s central bank (CBE) plans to eliminate the currency black market in less than a year, Hisham Ramez, the bank’s governor, said on Tuesday.  “My internal target is six months – but let me tell you, one year and this will disappear, this kind of grey market, because it is an issue of confidence,” which shows signs of being restored, Ramez told a US business mission to Egypt gathered in Cairo.

Ramez stressed that foreign currency was available in Egypt, albeit outside the formal banking sector, recalling that USD 1.5 billion was sold to the banks when the CBE issued Egyptian pound-denominated investment certificates to finance an extension of the Suez Canal in September. “We don’t have a problem of foreign currency availability as a country: the problem is that it is not in the right channel,” he added, without specifying how the CBE would tackle the issue.

Ramez assured that the reserves will exceed their current level “by far” in the “next three to four months,” without specifying how this will be achieved. Last month, anonymous sources told several Egypt media outlets that Saudi Arabia and the United Arab Emirates would deposit USD 5 billion (EGP 35 billion) in the CBE before the end of the month, but the reports have not been officially confirmed. (Read in Bloomberg or on Ahram Online)

EFG Hermes posts EGP100 mn 3Q14 net profit after tax and minority interest, up 58% yoy
EFG Hermes Earnings Release | 11 Nov
EFG Hermes posted third quarter net operating profit of EGP 247 million, a 46% increase yoy, translating into a Group net operating margin of 41% on the back of investment bank revenue growth. Net profit after tax and minority interest was EGP 100 million, up 58% yoy. This is in contrast to the results of EFG’s retail banking arm Credit Libanais which reported a net profit of USD 15.9 million, a decline of 11% yoy. Credit Libanais’ total assets stood at USD 9.0 billion with a loan-to-deposit ratio of 36.3%. EFG Hermes total assets stood at EGP 75.5 billion at the end of the quarter. (Read earnings release in English – PDF)

EGYPT POLITICS + ECONOMICS

Date of Egypt investment summit not set: Minister of Investment
Al Masry Al Youm | 11 Nov 2014
Minister of Investment Ashraf Salman is quoted as having said that Lazard and WPP are working with the government of Egypt to organize the upcoming investment summit. The minister confirmed that March 15 is not set a date for the event. The aforementioned companies are working with the government to come up with the most convenient date for the global financial institutions. (Read in Arabic)

Planning Ministry: Government to invest EGP 5.9 bn in revamping railway network
Al Masry Al Youm | 11 Nov 2014
The Ministry of Planning announced that EGP 5.9 billion have been earmarked from this fiscal year’s budget for the revamping of Egypt’s railway network. The state treasury will contribute EGP 2 billion with the balance of EGP 3.9 billion being financed through a loan from the National Investment Bank (EGP 1.4 billion) in addition to foreign loans and grants in the sum of EGP 2.5 billion. The announcement also noted that the investment in railways represents 42.9% of total funds from the budget directed at the transportation sector which stood at EGP 13.8 billion. The funds will be primarily be utilized in the upgrading of railway crossings, a culprit of railway accidents, as well as the revamping of locomotives and wagons and the automation of network control. (Read in Arabic)

Egypt negotiating new USD 1 bn Saudi deposit
Egypt Independent | 10 Nov 2014
The Egyptian government seeks to obtain a new Saudi deposit, worth up 2 billion Saudi riyals (USD1.06 billion) in the coming few days, according to  an official source. “The two sides are still in negotiations over the deposit’s value and conditions in terms of interest rate or repayment period,” the source revealed. (Read)

Mehleb: Nubia, Halayeb and Shalateen to get designated seats in the upcoming parliament
Al Masry Al Youm | 11 Nov 2014
The upcoming parliament will include designated seats for Nubia, Halayeb and Shalateen, according to Dr. Gamal Zahran of the Social Justice Alliance, quoting remarks by PM Ibrahim Mehleb during at a meeting he said was also attended by the ministers of investment, local development, transitional justice, youth as well as the prime minister’s advisor for elections. (Read in Arabic)

Egypt to cement its industrial and trading ties with India
Al Borsa | 10 Nov 2014
The Egyptian Indian Trade Committee will conduct two-days meetings in New Delhi in a move to increase trade between Egypt and India and also to capitalize on Indian expertise in the support and development of SMEs. The delegation of Egypt will includes representatives from the ministries of health, housing, labor force, as well as the general authority for industrial development, GAFI,  the Egyptian supervisory authority on imports and exports among others. Notable that trade volume between Egypt and India has climbed to USD 5 billion in 2013 against USD 3.26 billion in 2011. (Read in Arabic)

Ministry of Solidarity: 9 foreign, 8 Egyptian organizations legalized their status
Egypt Independent | 10 Nov 2014
The deadline set by the Ministry of Social Solidarity for associations and NGOs to legalize their status has ended on Monday. Minister of Social Solidarity Ghada Wali said in a statement that nine foreign and eight Egyptian organizations met the deadline, while the legal position of the rest still needs to be examined in terms of the nature of their activities. (Read)

ON YOUR WAY OUT

Remember our report earlier this week about no-one having been arrested for holding a copy of Orwell’s “1984”? Well, the story has legs, as the BBC points out in Why George Orwell is trending in Egypt.

Egypt has pulled out of the world short-course swimming championships scheduled for next month in Qatar in protest of the event being hosted in, well, Qatar.

Opinion: Al Sissi unfazed by Egypt’s challenges. Hardly a sophisticated (or accurate or well-written) piece, but indicative of the thirst in the Gulf for good-news pieces on Egypt.

No one seems certain whether this is a trial balloon or “newspaper talk,” but up to 100,000 stateless residents of Kuwait could reportedly be offered citizenship in the Comoros Islands. Human rights groups are appalled.

Morocco has been expelled from the Africa Cup of Nations for having had the temerity to suggest that it might delay hosting the event on fears it might prevent the spread of Ebola. Egypt and South Africa had earlier made similar rumblings. According to the AP, the Confederation of African Football (CAF) repeatedly refused Morocco’s request to postpone the African Cup, and gave the country until Saturday to commit to the planned dates. Morocco declined again. No country has publicly said yet that it wants to host the tournament in Morocco’s place.

US blacklists Yemen ex-president Saleh, Huthi commanders: The United States hit Yemen’s former president Ali Abdullah Saleh and two allied Huthi rebel commanders with sanctions Monday, two days after Saleh walked out on the new government. The US Treasury said it was blacklisting Saleh, Abdullah Yahya al-Hakim and Abd al-Khaliq al-Huthi “for engaging in acts that directly or indirectly threaten the peace, security, or stability of Yemen.” (Read)

Standard Chartered is shuttering up to 100 retail branches to devote resources to more profitable lines of business including private wealth management. The bank is coming under shareholder pressure following three earnings warnings in the last year, the FT writes this morning.

This collection of Google Earth images is clickbait, we admit, but no less stunning for having gone viral on Twitter last night: Beautiful, Terrifying Google Earth Images That Expose the Planet’s Rapidly Changing Face (Read)

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