Monday, 6 April 2015
WHAT WE’RE TRACKING THIS WEEK
We have a long weekend coming up: banks, businesses and markets will be closed 12-13 April in observance of Coptic Easter and Sham El-Nessim.
WHAT WE’RE TRACKING THIS MONTH
Polls open in Sudan’s presidential elections on Monday, 13 April. The re-election of incumbent Omar el Bashir is being seen as a foregone conclusion by many in the country’s opposition, with a number of groupshaving stated their intention to boycott elections.
Spring forward: Clocks in Egypt will advance one hour ahead on Thursday, 30 April. Daylight savings time returned last year after being abolished in 2011. Al Mal reminds us that the clocks turn back in June for Ramadan.
LAST NIGHT’S TALK SHOWS
The Islam El Behery vs. Al Azhar saga continued to heat-up last night. Lamees El Hadidy said, “I have not seen the program so I won’t comment on the content, but I am categorically against the banning of any television show.”
Effat Abdel Azim from GAFI called in to say that they have notified El Kahera Wel Nas to change the content of Behery’s program. “We did not ask them to take the show off air, they just have to change content,” said Abdel Azim.
Islam El Behery called in to defend himself against the allegations. “If anyone can prove that I was attacking the Koran and the Prophet I will stop my own program.” According to Behery his next episode will air next Sunday on El Kahera Wel Nas. It is as of yet unclear whether there will be a change in content but it seems unlikely given El Behery’s adamant stance against the allegations.
“Quite honestly we need Al Azhar to be more active and open minded. How else are we supposed to reform the religious discourse, there has to be debate,” said El Hadidy.
The recent movement to legalize hashish in Egypt caught El Hadidy’s attention. She invited Osama Salama, the head of the tobacco traders association to speak his mind on the issue. According to Salama the illegal trade of hashish in Egypt is estimated to be between EGP 40-45 bn per annum.
“It is a fact that there is a large segment of the population that uses hashish. We want to legalize the trade so that the government may benefit. By imposing a 10% tax the state could gain up to EGP 4.5 bn that could be put to good use for infrastructure and education projects,” said Salama.
El Hadidy, who couldn’t wipe the smirk off her face while Salama was talking said, “So we will legalize hashish, heroin and cocaine while we’re at it.”
Amr Adeeb said, “the ministers seem to have all disappeared after Sharm El Sheikh. No one knows where they are. Maybe they are all hiding in a cave or something. Even Prime Minister Mahlab who was criticized for being too active seems to have taken a break. People are starting to ask “was the EEDC real?”
Ibrahim Eissa devoted the majority of his program to a discussion on the validity of military intervention in Yemen. “Airstrikes alone have never been effective. Without boots on the ground the results that can be achieved are very limited. “I’m not saying that we should not have participated but we have to set goals; what are we trying to achieve? What should we do? To what lengths are we willing to go and why,” said Eissa who has been a vocal critic against the air strikes.
“Having a difference of opinion with President Al Sisi on Yemen does not mean that we don’t have confidence in the President nor does it diminish in any way his credibility,” added Eissa.
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Contrary to all anecdotal evidence and the general sentiment, business conditions in the non-oil private sector continued to worsen in March according to the HSBC Egypt PMI, albeit at a slower pace. The non-oil private sector remained in contraction territory in March for the third consecutive month, with the Headline PMI recording 49.6. Subdued demand and low customer turnout drove a production decrease with an upward cost pressure exerted by the weaker currency (and foreign currency inaccessibility). March marked the fourth straight month of reduced employment figures. The only upside from a largely dreadful report: new order book volumes returning to growth (although “the pace of expansion was negligible”). You can read the full report here in pdf.
Why is the stock market lagging? The EGX 30 tanked again yesterday, down over 3% on very thin volumes, leaving the benchmark index off more than 11% in the past month. After earlier in the day attributing weak sentiment to the drying-up of individual investor liquidity in the wake of Tax Day (31 March), Al-Borsacobbled together a more comprehensive roundup of traders’ views. Sayeth the talking heads: 1) said the market is waiting for the EEDC to be translated into concrete action, 2) pointed to the absence of the promised tax reforms, particularly as regards to the capital gains regime, and 3) noted that foreign appetite for Egyptian shares is weak as too many investors are still in queues waiting to repatriate their gains and dividends. Any one of those explanations holds more water than the assertion that it’s because of Yemen.
Wait, was that the ‘mega auction’ we’ve been waiting for? The Central Bank announced that it sold USD 281 mn in interbank market to clear all outstanding strategic staple commodities, according to astatement. If so, it was nearly a non-event: The last large-scale auction say the CBE pump USD 420 mn into the market back in early march, Al-Mal reminds us.
El-Sisi meets on energy policy; EGPC takes action before peak summer season: EGPC chief Tarek El Molla says the state is taking extra precautions to ensure efficiency in the distribution of fuel to power generation stations, with steps taken including the storage of large quantities of diesel and heavy fuel oil at stations away from Cairo, including areas in Upper Egypt. In addition, EGPC has USD 520 mn earmarked for the purchase of extra quantities of feedstock during the peak summer consumption period. El Molla added that the state will continue to channel 80% of total natural gas production to power generation. His statements came as President Abdel Fattah El Sisi met yesterday with Prime Minister Ibrahim Mahlab and the ministers of oil and energy to review energy policy. El Sisi stressed the importance of ongoing maintenance (Upper Egypt is, we again note, suffering rolling blackouts over the next two weeks as back-due maintenance is performed) and reviewed follow-up steps on energy contracts and MoUs inked at the EEDC, among other steps. Al-Mal carries Ittihadiya’s lengthy readout on the meeting; Al-Ahram has a shorter version, but plays it more prominently under a headline declaring in part that the president has demanded ministers “speed-up construction of new power plants and the diversification of energy sources,” tagging it with a second storyrecapping Energy Minister Mohamed Shaker’s plan to add 3.6 GW in capacity to the national grid by August 2015.
A senior official at the Housing Ministry said on television yesterday that the government expects to sign its contract with Arabtec for the 1 mn homes affordable housing project within a month.
CIB’s board has empowered the bank’s management to decide whether to submit a binding offer for Citigroup’s retail portfolio in Egypt after a due diligence process, Reuters reports. “There can be no assurance that should the management choose to submit an offer, the said submission would result in any specific transaction, and it is possible that no transaction will occur,” CIB said in a statement.
Edita will invest EGP 350 mn in adding five new production lines to the factory in Sixth of October, the company’s CEO Hani Berzi told Al Mal, noting that the new lines will increase production by 40%. Berzi added that Edita will add 500 new job opportunities before year’s end and it is also planning on expanding regionally to new markets.
El Sewedy Electric’s Ahmed El Sewedy was appointed to head the Egyptian delegation to the Ethiopian Egyptian Business Council, Mounir Fakhry, the Minister of Trade announced. El Sewedy Industries Group represents the largest Egyptian investment in Ethiopia at USD 250 mn out of total Egyptian investments of USD 2 bn. The government is looking to increase its total trade with Ethiopia from the current USD 200 mn to USD 500 mn within three years.
** Save us from the tyranny of the calendar: Name the New Capital: Enterprise is opening up nominations for naming the newly proposed administrative capital, as we’ve nearly exhausted the calendar while naming the rest of Egypt. In fact, a calendar-based name would be just about the only thing worse than calling it The Capital Cairo. The best nominations will be shortlisted and put up for a straw poll on our website soon. We’ll keep nominations open until next week — 16 April, to be exact. Shoot us your suggestions on email@example.com and h/t Hassan B.
A police officer was killed and two civilians were injured after an IED exploded on 15 May bridge connecting 6 of October bridge to Zamalek on Sunday. Terror group Ajnad Misr claimed responsibility for the attack, as reported by jihadi monitoring service SITE. The founder of the group, Hamam Mohamed, was killed in a firefight with police who raided his hideout in Giza. The Ministry of Interior reports that they recovered from Mohamed’s possession “an automatic firearm, a pistol, four explosive devices including one with a magnet so that it could be attached to a car, 18 incomplete explosive devices, materials used to make bombs and over EGP 76,000,” as reported by Ahram Online. Also on Sunday, militants fired on a church in Alexandria, injuring a police officer and three civilians, Reuters reports.
One is almost tempted to feel sorry for Islamist terrorists, as once again Egyptians demonstrate that they are impossible to terrorize, evidenced by the speedy arrival of the cotton candy man on the scene of the bomb site.
Cigarette retailers call for legalization of hashish: Lamees El-Hadidy wasn’t joking: The head of the Egypt’s Cigarette Retailers Association, Osama Salama, has indeed called for the legalization of hash. Salama urged policymakers to take his proposition seriously, saying it would help plug the state’s budget deficit within “a few years,” claiming that the illegal trade is worth about EGP 42 bn annually in Egypt. He added that he believes about 50% of Egypt’s population consumes the drug.
The trial of a police officer charged with the killing of activist Shaimaa El-Sabagh will start on 10 May, a prosecution statement stated on Sunday, Ahram Online reports.
YEMEN UPDATES: The Saudi-led coalition has given the green light for humanitarian aid to be released in Yemen following calls for a 24-hour ceasefire by the Red Cross, a call which Russia joined, presenting a draft resolution to the UN Security Council on Friday. In other Yemen news:
A consortium of the UK’s Chipperfield Companies Group, Canadian Maple Leaf and other investors has submitted a proposal to the Egyptian Housing Ministry to build a safari park in Egypt worth USD 1.1 bn, as reported by Daily News Egypt.
Egypt, alongside India and Indonesia, is briefly noted as a voracious energy consumer that has “managed to cut subsidies significantly to head off fiscal disasters” in the WSJ‘s view on how “the Middle East’s voracious energy use, propped up by subsidies, is threatening exports; consumption is ‘out of control’”.
We’ve been enjoying the FT’s Working Smarter column lately, including this one about how one office is replacing email with handwriting for project updates or this piece on the joys of 15-minute meetings.
CORRECTION: In yesterday’s issue, we misstated that the finalized investment law had not been issued, when in fact it was released upon the beginning of the EEDC. The law that was meant to be referred to in yesterday’s issue was the new tax law, which has yet to be finalized.
WORTH READING + WATCHING
Thomas Friedman’s softball interview with U.S. President Barack Obama in yesterday’s New York Times. The article features both a 46-minute video interview as well as written excerpts from the same exchange. The intended audience is first and foremost Israelis, followed by Sunni states who go largely unnamed, and nominally, the Iranians themselves. With regard to the Sunni states, President Obama said that aside from the external threat [posed from Iran], that these countries face internal threats: “populations that, in some cases, are alienated, youth that are underemployed, an ideology that is destructive and nihilistic, and in some cases, just a belief that there are no legitimate political outlets for grievances. And so part of our job is to work with these states and say, ‘How can we build your defense capabilities against external threats, but also, how can we strengthen the body politic in these countries, so that Sunni youth feel that they’ve got something other than [the Islamic State, or ISIS] to choose from. … I think the biggest threats that they face may not be coming from Iran invading. It’s going to be from dissatisfaction inside their own countries …”
The issue that President Obama chooses not to address here, however, is that at least in the case of the Gulf states, these disaffected segments of their societies are often their Shiite minorities, sometimes acting as Iran’s proxies. While President Obama mentions Iran’s proxy wars in other segments of the interview, he makes no link between them here, and it is difficult to envision how the United States could or would engage with the Gulf in addressing their Shiite minorities.
The best Freudian slip of the interview happens around the 29:40 mark: “Not only am I absolutely committed to making sure that they [the Israelis] maintain their qualitative military edge and that they candefer — deter any potential future attacks …”
Indian Thriller. (Watch, running time: 3:29). After watching the preceding video, ask yourself: Is it little wonder so many Egyptians are so crazy for Indian films, which remain a staple of Egyptian state television? Indeed, mass affection for Indian culture is hinted at by the huge crowd of mainly young Egyptian women taking dance instruction at last week’s ‘India by the Nile’ festival, which we had noted last Wednesday, attended by Indian Ambassador Navdeep Suri. (Watch, running time: 1:29)
A MESSAGE FROM PHAROS HOLDING
NBE posts record-high net profit for FY14, but lags behind in corporate and retail loan growth.
Egypt’s largest bank, the National Bank of Egypt (“NBD”), recorded 23% growth in its bottom line, posting a Net Profit after Tax of EGP 3.7 bn in 2014. NBE, however, lagged behind private-sector banks in terms of the recovery in core corporate operations. Pitted against Commercial International Bank (“CIB”), for example, NBE recorded only 3% growth in its corporate loan portfolio compared to CIB’s 14.7%. Meanwhile, retail loan growth stood at 18% for NBE, almost half of CIB’s 30.8%. We believe that this falls back to the bulk of NBE’s deposit growth being channeled to government-issued securities, owing to its historic role of funding both the budget deficit and state-owned corporations. (continue reading here)
EGYPT IN THE NEWS
‘Obama Reconciles With Egypt’: The Wall Street Journal published possibly the sole positive take in Western media regarding the release of the executive hold on U.S. military aid to Egypt. (Read)
Quartz’s Defense One has a solid view on the resumption of U.S. military assistance in ‘The Part of Obama’s Arms-To-Egypt Deal That Matters,’ which at its crux suggests that Egyptian diplomats have been handed another challenge to address: “Little understood, but critically important, cash-flow financing is how the U.S. has provided security assistance to only two countries: Israel and Egypt. Essentially, it works as a credit card, allowing these countries to finance the purchase of American weapons with money advanced to them.President Obama has proposed taking away Egypt’s credit card and instead giving it a debit card, so the weapons purchases will be taken out of Egypt’s annual defense allocation. This may sound like an arcane accounting issue, but it represents the most significant shift in the security relationship since 1979. It will cause some heartburn in Cairo. The Egyptians have long valued cash-flow financing. Beyond the prestige, it has allowed them to modernize their military and purchase major weapons over the course of several years. By enabling the Egyptians to move away from Soviet-made systems and by implementing the Camp David peace with Israel, this has served U.S. interests. But the problem with cash-flow financing has been how it limits the United States.”
The Unknown Man, and the Deaths at Abu Zaabal: The New Yorker gives a detailed and harrowing account of the Abu Zaabal deaths, when 37 prisoners died of suffocation when police fired tear gas into an enclosed police van where they were being held prisoner. A retrial began on 18 March after the accused were found innocent, as the judge declared the individual who had fired the tear gas was unknown. (Read)
‘Egypt: Halt Executions of Six Men’: On Saturday, Human Rights Watch called upon Egypt to stay the execution of six men facing the death penalty, on the basis that some of the men in question were allegedly in detention when the crimes in question were committed. (Read)
The Ministry of Foreign Affairs issued two statements on Saturday condemning the attack on the Yarmouk refugee camp as well as the terror attack in Kenya.
President Abdel Fattah El Sisi is set to visit Japan in the upcoming period following an invitation Prime Minister Shinzo Abe, the Minister of Foreign Affairs announced according to Amwal Al Ghad. No set date for the visit was given.
Tunisia’s ambassador to Turkey has been summoned to explain the remarks of Tunisian Foreign Minister Taieb Baccouche, who on Thursday simply pointed out that Turkey is a major transit point for terrorists in the region. “We have asked our ambassador in Turkey to draw the attention of the Turkish authorities to the fact that we do not want a Muslim nation such as Turkey to help directly or indirectly terrorism in Libya by facilitating the movements of terrorists,” Baccouche said, as reported by the AFP.
On a wholly, completely unrelated point, let us take this moment to ask God to continue to bless the people of Tunisia. Everyone should go visit Tunisia and support their tourism and economy. Now, let’s take a moment tolisten to their anthem.
Meanwhile, Erdogan is set to make his official state visit to Iran on Tuesday.
Speaking of Iran, Harvard’s Belfer Center has translated the Iranian Foreign Ministry’s factsheeton the framework nuclear agreement signed between Iran and the P5+1 states.
ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM
Electricity market to be restructured with Italian, Greek help
Al Borsa | 04 April 2015
Egyptera will cooperate with Italian and Greek electricity regulators to restructure the domestic electricity market to increase the efficiency of power generation in Egypt. The restructured electricity market aims to attract increased investments in production capacities as well as in distribution. Egyptera has plans to produce a competitive energy production market over three phases to accommodate intensive user linked to the transportation network, customers contracted to receive more than 500 kwh, and other consumers. Each phase is expected to take three years. (Read in Arabic)
Ministry of Electricity prepares tender for El Siouf power station
Al Mal| 5 April 2015
The Ministry of Electricity has requested that 11 companies confirm their intent to participate in a tender for the construction of a 900 MW power station in El Siouf Alexandria. The ministry plans to provide the 11 interested companies with tender guidelines for the projects before the end of this month. The 11 companies comprise both local and international companies, most notable of which are: Harbin Electric, Siemens AG, and Elsewedy Electric. (Read in Arabic)
IDA liaising with ministries in preparation for issuing new cement licenses
Al Masry Al Youm | 05 April 2015
The Industrial Development Authority (IDA) has contacted the ministries of petroleum and electricity to liaise with issuance of new cement licenses and the impending energy requirements that would follow. IDA is also contacting the governorates regarding the available plots of lands for the 12 licenses that will be issued. The winners of the licenses will be required to secure their own energy sources. A source at the IDA said the each license is expected to go for at least EGP 20 mn (Read in Arabic and here)
Government sets EGP 2 bn to reimburse residents of the Maspero triangle
Al Borsa | 04 April 2015
The governorate of Cairo has estimated the reimbursements that will be paid to the residents of the Maspero triangle at EGP 2 bn. The government is allowing the area’s residents up until the middle of this month to present documents showing their ownership of units in that area. Development operations in the area have been postponed due to the absence what the Governor of Cairo has referred to as a mutually acceptable agreement. (Read in Arabic)
New Urban Communities Authority offers land through public lottery
Al Borsa | 05 April 2015
The New Urban Communities Authority will be offering 3260 parcels of land through a public lottery system on Tuesday, 7 April. Investors will be able to reserve these parcels starting from 20 April until 28 May. These parcels range from 400 to 1650 meters squared in area. By offering land, the government hopes to spur growth in the real estate sector, said Egypt’s Minister of Housing. The parcels will be allocated in various satellite cities, including New Cairo, 6th October, Sheikh Zayed, and Shorouk City. (Read in Arabic)
TELECOMS & ICT
CIT Minister calls for wider access to high speed internet
Al Masry Al Youm | 05 April 2015
The CIT minister, Khaled Negm, has urged TE to accelerate its process to replace copper wires with optic-fiber cables. Negm also called telecom operators and ISPs to expand the provision of high speed internet as well as improve their customer service operations and ensure that services are provided at reasonable prices. The minister’s comments were made as he was reviewing the cable security procedures at the Ramses centrale. (Read in Arabic)
BANKING & FINANCE
PBDAC seeks to swap EGP 1.8 bn owed by the finance ministry with government debt
Al Borsa | 04 April 2015
The Primary Bank for Development and Agricultural Credit is seeking to swap EGP 1.8 bn owed to it by the Ministry of Finance for government treasuries. The bank aims to put an end to the spiraling losses being incurred due to NPLs it has extended the state. The Finance Ministry had paid EGP 120 mn of the amount owed. (Read in Arabic)
OTHER BUSINESS NEWS OF NOTE
Cairo Metro ask EIB for an EGP 1.3 bn loan
Al Mal | 05 April 2015
The Egyptian Company for Metro Management and Operation (Cairo Metro) is asking the European Investment Bank (EIB) for an EGP 1.3 bn loan to finance the purchase of 13 new trains. The head of Cairo Metro told Al Mal that the company will hold a meeting with the EIB to discuss the loan. The new trains are part of the plan to refurbish the second metro line. Al Mal notes that Cairo Metro had announced multiple times the success of tenders to purchase 13 new trains, before being cancelled swiftly due to the absence of secured financing. (Read in Arabic)
Dar Al Handasah begins its development of East Port Said port
Al Mal, Youm7 | 05 April 2015
According to Dar Al Handasah ‘s Director of Operation, development of the 6 ports which fall under the Suez Canal Area Development Project will cost approximately USD 20 bn. The lion’s share of these investments will be directed towards the development of the ports of East Port Said and Ain El Sokhna. (Read in Arabic) On a related note, the director revealed the company was recently instructed to commence execution of the East Port Said phase of the project. Dar Al Handasah has entered into negotiations with unnamed dredging company to begin work on the project.
Suez Canal Authority begins preparations for New Suez Canal inauguration
Al Borsa | 05 April 2015
According to a government representatives, preparations have begun for the inauguration of the New Suez Canal project. The same source added that dredging works for the project would be completed before July, ahead of schedule. (Read in Arabic)
Libya intends to deposit oil revenues in the UAE
Ahram Gate | 05 April 2015
The Libyan government intends to deposit oil and gas revenues to a foreign bank account to keep it away from the rival government in Tripoli. Libya’s National Oil Corporation was tasked with opening a bank account in the UAE to use it for storing funds. (Read in Arabic)
BY THE NUMBERS
USD CBE auction (last sale Thursday, 02 April): 7.5301 (unchanged since Monday, 02 Feb)
USD parallel market (Sunday, 05 April): 7.64 (-0.01 from Saturday, 04 April)
EGX30 (Sunday): 8,607.66 (-3.19%)
Turnover: EGP 418.0 mn (34% below the 90-day average)
WTI: USD 49.86 (+1.47%)
Brent: USD 55.77 (+1.49%)
TASI: 8,589.7 (-1.6%)
ADX: 4,542.2 (+0.1%)
DFM: 3,665.6 (+1.4%)
KSE Weighted Index: 425.0 (+0.1%)
QE: 11,763.6 (+0.6%)
MSM: 6,287.3 (+0.3%)
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