Wednesday, 2 December 2015

Tarek Amer makes his first move:
CBE clears foreign investor backlog after an FX auction micro-drama


Tarek Amer makes his first move: CBE clears foreign investor backlog after an FX auction micro-drama (Speed Round)

Hussein Salem’s EMG denies it has agreed to allow Alaa Arafa’s Dolphinus to import Israeli gas through its pipeline (Speed Round)

Salman rings up Lamis, who also notes that Cairo is one of top 10 places in the world in which to found your startup (Last Night’s Talk Shows)

Qalaa sells agrifoods investments — and it looks like its sale of Qalaa’s Misr Glass Manufacturing to Middle East Glass may be back on (Speed Round)

EFG Hermes Private Equity eyes renewable energy opportunities (Banking + Finance)

Garment sector “in crisis” after EgyptAir cargo ban (Manufacturing)

Egypt’s underwater treasures will be displayed in London in 2016 (Egypt in The News)

Are body doubles the future of telecommuting? (Worth Watching)

By the Numbers + How are major corporates pricing the USD in their FY2016 budgets?


Today is the final day of voting in runoff elections for the House of Representatives. Some 426 candidates are contesting 213 individual seats in 13 governorates, including Cairo, North and South Sinai, and Menoufiya. The Higher Elections Committee is expected to announce the final results tomorrow.

Day two of the six-day African Leadership Conference, hosted by the National Authority for Remote Sensing and Space Sciences, at Jolie Ville Naama Bay Hotel, Sharm El Sheikh. The conference will conclude on Friday.

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The Markit / Emirates NBD Purchasing Managers Index for Egypt will be released here at 7:30am CLT on Monday, 7 December. PMIs for the United Arab Emirates and Saudi Arabia are due out at the same time.

The “Mega Project Conference“ on December 8-9 will showcase energy and infrastructure projects, with six Cabinet ministers slated to attend the MEED-organized event. The conference will address challenges in financing, project delivery, procurement strategies and showcase potential for JVs and partnerships in Egypt’s changing landscape, Al Mal says.

At least four high-profile renewable energy gatherings are taking place in Egypt and regionally next week. Egypt’s feed-in-tariff scheme takes center stage in the latest press release promoting the MENA Clean Energy Forum set to take place in Dubai on 8 December. The latest piece quotes Lamya Abdel Hady, Director of Egypt’s Solar FiT programme at the Egyptian Electricity Transmission Company, as saying the FiT regime in Egypt “has had an incredibly positive effect on our national renewable energy programme, and will continue to underpin [Egypt’s] clean energy deployment and investment for the near future.” Check out the press release here, visit the event’s homepage here (it’s not exactly mobile-friendly), or head straight to the agenda here (pdf). Also next week:


Lamis El Hadidy opened her program Hona Al Assema on CBC Egypt by noting President Abdel Fattah El Sisi returned to Cairo yesterday following his participation in the COP21 UN Climate Change Conference. Later, El Hadidy noted that Sada El Balad television host Ahmed Moussa was assaulted on the streets of Paris by supporters of the Muslim Brotherhood. El Hadidy said the purpose of such incidents is to attempt to intimidate the domestic press and create sensationalist headlines, but that such attempts will fail. The video of Moussa’s assault may be viewed in the following link, but please note that the video contains profanity in Arabic. (Watch in Arabic, running time: 56 seconds)

El Hadidy also noted that Cairo made it on the list of top ten cities in the world to launch a startup, as compiled by Seedstars World startup competition group and published by Forbes.

The hostess then spoke by phone to Ahmed Abou Saad, chairman of Rasmala Egypt Asset Management, on Tuesday’s move by Central Bank Governor Tarek Amer to clear the entire USD 547.2 mn backlog owed to foreign investors. Abou Saad praised the decision, calling it necessary to improve the trust that foreign investors have in the Egyptian market. He also praised Amer’s leadership and initiative, saying Amer acts without being asked. After the call ended, El Hadidy wondered aloud where the money came from, if reserves remain unaffected. That said, it’s unclear at this time that the money did come from reserves — absent an announcement from the CBE, we won’t know much for at least a month, when the CBE releases NIR figures.

El Hadidy also spoke with Investment Minister Ashraf Salman by phone, focusing on the government’s efforts to streamline the process for investors and entrepreneurs setting up businesses, including the one stop shop. El Hadidy began by taking note of Cabinet’s decision on last Tuesday to entrust the General Authority for Investment and Free Zones (GAFI) as the single point of contact for investors in matters related to granting licenses and approvals, as reported by Youm7. El Hadidy spoke for many in the business community when she bluntly asked what’s new — wasn’t GAFI always in charge?

Salman explained that implementing the decision has required a process over the past three months to try to establish GAFI as the only entity responsible instead of multiple government agencies. In response to El Hadidy’s question as to whether investors would only have to work with GAFI to acquire land, Salman stated that the Investment Ministry will coordinate with all relevant government agencies to acquire approvals, but at the end of that process, investors will only have to go through GAFI. (Watch in Arabic, running time: 12:41)

El Hadidy hosted actress and UN Goodwill Ambassador Yousra in her studio for the latter half of the program, on occasion of World AIDS Day on Tuesday. El Hadidy had previewed the segment at the top of her program by saying the stigma against those living with HIV/AIDS is wrong and that perceptions need to change.

The host also noted the visit by Sheikh of Al Azhar Ahmed el-Tayeb to Cairo University on Tuesday, which she said represented a show of support to the university following its recent decision to enforce a ban on the face veil (niqab) for all of its instructors.

No Country for Stray Dogs: Ibrahim Eissa on Al Kahera Wal Nas devoted a significant portion of his program to Egypt’s endemic stray animal population, with a particular focus on dogs. Eissa noted the government’s initiatives to address the issue — including shooting dogs in the street as well as poison — and all the associated problems and pitfalls that go with with such approaches.

Later in the program, Eissa lamented what, in his view, is a dangerous regression to pre-2011 politics, or lack thereof, which he views is a threat to stability: “When people who don’t want political opposition point to the countries around us in the region and ask if we want to end up like them — we will end up like them if we don’t allow for political diversity.” (Watch in Arabic, running time: 14:34)


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Tarek Amer has made his first official move as governor of the Central Bank of Egypt. Hours after yesterday’s FX auction closed, the CBE issued a statement saying it had cleared a USD 547.2 mn backlog owed to foreign investors, a figure it said represented “all the pending backlog to date,” Bloomberg reported. The newswire quoted CI Capital economist Hany Farahat as saying the move “definitely signals more liberal foreign exchange management in Egypt. … It’s a significant positive catalyst, after a few months of none.” Reuters’ Asma Sharif, meanwhile, has a long take on what was ultimately a fairly dramatic day, quoting Farahat getting at the question we know is on the minds of the entire banking community: “There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.” If you need some context or background, Sharif’s piece is particularly worth reading for its recap of the policy moves Amer has advanced since his appointment was first announced.

So, what’s the drama? The announcement on the backlog came after bankers spent more than an hour and a half on edge yesterday as the CBE’s customarily 30-minute-long foreign exchange auction dragged on for more than two hours amid mounting speculation there wasn’t an auction taking place at all. The sale, which typically begins with banks submitting bids between 11 and 11:30am, usually ends within a half hour — but stretched yesterday to 1:30pm. The absence of an explanation in the interim left some senior bankers speculating that the CBE had opted not to hold an FX auction. Ultimately, the CBE left the EGP / USD rate unchanged at 7.7301, with banks taking USD 39.4 mn of the USD 40 mn on offer, per the CBE’s FX auction result page.

“There was a rumor today about an exceptional FX auction,” one banker told Al Mal. “That’s why a lot of banks didn’t join the auction, and when they found out it wasn’t an exceptional FX auction they tried to submit bids but were not notified by the CBE of whether or not they were accepted.” In fact, one banker with whom Enterprise spoke wondered whether the CBE was ringing banks one-by-one with offers of FX, as it did two weeks ago. Reuters, meanwhile, said three bankers claimed they submitted bids and had been told by the central bank that it had “nothing to offer,” while another said they were told their bid was “noted.” Reuters said “the denials were unusual and caused confusion in the market as banks had been accustomed to receiving a regular quota of foreign exchange at each auction.”

The CBE’s next scheduled auction is on Thursday, and market expectation is that it would be an exceptional sale after word emerged last week that the CBE intended to flood the market with c. USD 1 bn in hard currency to start chipping away once more at the backlog.

EGX chief Mohamed Omran welcome Amer’s move yesterday, reportedly telling Al Borsa in brief remarks that clearing the backlog is an important step toward restoring investor confidence.

Meanwhile: An official at state-run EGPC is complaining to the press that the central bank is unable to meet the national oil company’s USD requirements. The result is a backlog of petroleum product imports, back-due payments for natural gas and overdue loans, the Daily News Egypt claimed. EGPC had requested USD 2.4 bn split over three equal installments to cover its needs during the first quarter of FY2015-16. The CBE could only provide USD 1.8 bn, while EGPC provided the rest from its own budget, the paper claimed. Meanwhile, EGPC postponed issuing 10 exploration projects to foreign companies until Brent oil prices stabilize, reports Al Borsa. The projects had security clearance, said EGPC CEO Mohamed El Masry, but current prices are a deterrent. Brent oil prices have fallen to the mid-USD 40s per barrel from an October high of USD 50.

Wondering what Western policy makers are reading about Egyptian monetary policy this morning? We suspect AmCham researcher Brendan Meighan’s piece for the Carnegie Endowment’s Sada blog will be on the list. Meighan boils CBE Governor Tarek Amer’s options down to three scenarios: Lift the limits on hard currency deposits, embrace depreciation, or sign up for an IMF loan and, presumably, the structural adjustment program that goes with it. His conclusion: “A depreciation of the pound and a freeing up of the foreign exchange market will reduce uncertainty in the investment environment, allowing foreign investors more confidence in their ability to import needed inputs and repatriate profits abroad.”

East Mediterranean Gas (EMG) is denying it is party to an agreement that would see Alaa Arafa’s Dolphinus Holding import Israeli natural gas from the offshore Leviathan field, Israel’s Globes reports. An agreement would require Dolphinus, together with Leviathan partners Noble and Delek, to come to terms with Hussein Salem’s EMG, which operates the natural gas pipeline linking Egypt and Israel. The paper quotes a statement from EMG as saying “No talks are taking place between EMG and Dolphinus on such a[n agreement] and there have been no negotiations on the matter in the past.” Globes counters with a source “close to the Leviathan partnership” as saying “Dolphinus has signed a letter of intent with most of the shareholders in EMG, and as we speak a meeting is being held in London between representatives of Dolphinus and of EMG on using the gas pipeline.” The newspaper speculates that Israeli businessman Yossi Maiman, a 12.5% shareholder in EMG, is using the Leviathan-Dolphinus talks “in the arbitration in which he is involved against the Egyptian government … to obtain compensation … for the cancellation of the contract to supply Egyptian gas to Israel.” As we reported last week, Delek and Noble Energy announced they had signed a gas export agreement with Dolphins.

In its most recent divestitures, Qalaa Holdings’ Gozour business unit sold fully written-down cheese manufacturer El-Misrieen in Egypt as well as assets belonging to RIS in Sudan in two separate transactions, the company said yesterday. The sale of subsidiary RIS’s two halawa and biscuit plants in Sudan to a Sudanese investor was for an enterprise value of USD 4.3 mn. In Egypt, Gozour divested Misr October for Food Industries (El-Misrieen), which ceased operations in 2012, at an enterprise value of EGP 50 mn. The acquirer, an unnamed domestic investor, “will assume all debt, liabilities and obligations of El-Misrieen, including bank debt of c. EGP 16.5 mn.” The company is divesting non-core assets across its footprint as it “focuses on core business units including Egyptian Refining Company (a USD 3.7 bn megaproject that is nearing the 75% completion mark and is on track to begin production in 2017) and TAQA Arabia (Egypt’s leading independent energy distribution company).” Pharos Holding was sell-side advisor for the El-Misrieen transaction.

Qalaa’s other divestment plans are moving forward, as Middle East Glass upped its offer to acquire Qalaa’s Misr Glass Manufacturing (MGM) to EGP 800 mn for 90% of the company, after working out some differences in the transaction, Al Borsa reports. Arab African International Bank will issue an LG for the full amount of the agreement. MGM had pulled out of the transaction earlier in the month after Middle East Glass cut its offer price to EGP 730 mn for 90% of the company’s share, having earlier offered EGP 850 mn for 100%.

FX liquidity, cost-sharing agreements, and EPC financing are key features of the Electricity Ministry’s strategy to finance power projects: The Electricity Ministry is in talks with the Finance Ministry to make FX available to renewable energy companies to pay the interest on loans for their projects — and to facilitate access to credit. This comes as Cairo Solar is negotiating with four banks to provide it with letters of guarantees for EGP 30 mn to cover 70% of its share in its cost-sharing agreement with the Ministry, Al Borsa reports. Banque Misr would not issue a letter of guarantee for the company until it secures financing from the International Finance Corporation (IFC) for a 50 MW plant, said Cairo Solar’s CEO Hisham Tawfik. Cairo Solar is one of an expected 39 companies to enter into cost-sharing agreement with the Ministry. Eleven renewable energy companies signed cost-sharing agreements with the Electricity Ministry on Tuesday for projects that link solar power plants with the national grid, in addition to feed-in tariff infrastructure projects in the Benban region of Aswan, Al Borsa notes. Private companies including Enel Green Power and the Access- Enel partnership will develop solar power plants, while the Ministry will build four transmission stations and roads for the developments.

The Electricity Ministry will rely extensively on engineering, procurement and construction (EPC) financing — whereby the government will guarantee loans for the projects — to help fund its EGP 66 bn plan to expand power production and transmission capacity, according to Al Mal. The newspaper suggests energy experts have concerns with the state’s reliance on this form of financing, saying it places an unnecessary burden on the state treasury. They encouraged the expansion of the build-own-operate (BOO) and build-own-operate-transfer (BOOT) systems, which place the primary financial burden for the project on the contracted company.

How hot is Egypt’s leasing sector? Egyptian Financial Supervisory Authority chief Sherif Samy said yesterday leasing contracts shot up nearly three-fold to EGP 16 bn at the end of October 2015, compared to EGP 5.4 bn at the same time the year before, according to a brief report by Amwal Al Ghad. Banks and non-bank financial players alike battled for market share in the leasing space this year, with one of the most recent entries being the launch of EFG Hermes Leasing this past June.

A plan to allow UK flights to return to Sharm El Sheikh is now complete, British Ambassador to Egypt John Casson said following a meeting with Tourism Minister Hesham Zaazou, reports El Watan. Casson was granted authorization by the British government to approve a joint plan to resume flights as soon as possible, he noted. The story, which Casson retweeted, notes that the agreement will now move to the implementation phase, but does not set out a timeline for the resumption of flights. British Airways, easyJet and Monarch have all confirmed they have cancelled all flights to Sharm El Sheikh until second week of January.

Picking up where we left off yesterday with news the European Bank for Reconstruction and Development (EBRD) has earmarked USD 500 mn for investment in Egyptian renewable opportunities next year, the Riccardo Puliti, managing director for energy and natural resources at the EBRD, has penned a piece on the subject for the Financial Times’s Beyond BRICs blog. Read: “Financing renewables: how Egypt and Jordan are attracting private capital.”

Other international headlines this morning that either carry implications for Egypt or that are simply worth noting in brief:

  • Isis: The munitions trail“ in the Financial Times is a deep dive into the world of the weapons merchants — most of them on Turkey’s border with Syria — who “keep the world’s richest jihadi group stocked with munitions.”
  • The Financial Times piece “Saudi Arabia: The Wake Up Call“ we noted on Monday has crossed into the Arabic press with a long summary / near-full translation by Al-Borsa.
  • Facebook founder and CEO Mark Zuckerberg is a dad, and he and his wife have promised their newborn daughter they’ll give away 99% of their USD 45 bn fortune within their lifetimes. The announcement is front-page news in everything from the Financial Times and the New York Times to the Wall Street Journal and Re/code.
  • Does how you use your cell phone speak to your creditworthiness? That’s the premise behind new lending startups that the WSJ says “are looking to revolutionize lending in the developing world.” The paper notes that “even obscure variables such as how frequently a user recharges the phone’s battery, how many incoming text messages they receive, how many miles they travel in a given day or how they enter contacts into their phone—the decision to add last name correlates with creditworthiness—can bear on a decision to extend credit.”


Where there’s smoke? Nawaf Obaid, a former adviser to Prince Turki Al Faisal and Prince Mohammed bin Nawaf, wrote a series of tweets over the weekend, starting with this tweet (Read in Arabic), alleging that according to an unnamed Saudi diplomatic source, relations between Saudi Arabia and Egypt are strained over Egypt’s unsustainable financial position and disagreements over foreign policy.

The U.K.’s Daily Mail, bastion of fine journalism that it is, would very much like you to know that Sharm El Sheikh is a ghost town. In fact, they’ve run a photo essay to that effect, complete with a picture of a camel eating from a municipal garbage dumpster in Nuweiba. Be nice, dear readers: With U.K. tourists effectively barred from the resort town, the Mail needs something to fill the space previously allocated to its patented fortnightly “I went on a super-cheap vacation to Sharm and got food poisoning / ate bad food / got sunburn / was asked for tips” stories.

Meanwhile, Russia’s Sputnik reports that “Cuba, China to Replace Turkey, Egypt for Russian Tourists.”

Egypt’s underwater treasures will be displayed in London in 2016. The British Museum announced that it will host the first exhibition to feature more than 200 ancient Egyptian pieces found buried in the Mediterranean. The loans were part of the two lost cities: Canopus and Thonis-Heracleion, both of which were swallowed by the sea by the eighth century. Traces of the settlement were found starting 1996. Over the past two decades, archaeologists learned that the two lost cities were important cultural centers and busy trading hubs connecting Egypt with Greece. The exhibition, the first to show underwater archaeology at the British museum, will display some of the massive buried pieces such as the 6-ton red granite statue of Hapi, the God of annual Nile flooding of the Nile. The story is making international headlines across the world today.


The future of telecommuting? Body doubles: A new way to work from home. Work from home, but worry that you’re missing out on those spontaneous conversations at the office where solutions are sometimes found? Or are you just concerned that people at work are talking about you with no way to eavesdrop on them? The Atlantic’s health editor James Hamblin tries out “telepresence” — a mobile robot enabled with video chat. (Watch, running time: 3:37)


Wrapping up in Paris, where he was attending the COP21 climate change talks, President Abdel Fattah El Sisi continued to hold meetings on the sidelines with world leaders. Among the meetings yesterday:

  • Security talks with French Interior Minister Bernard Cazeneuve, during which the two discussed “effectively acting to halt the influx of weapons to terrorist groups, cutting off their sources of funding and preventing the misuse of modern technologies such as the Internet.”
  • Wrapping a wide-ranging meeting with French senators, including Senate President Gérard Larcher as well as senators Jean-Pierre Raffarin and Jean-Claude Gaudin, El Sisi invited Larcher to visit Egypt.

A delegation of 10 South Korean companies are planning a trip to Egypt to explore investment opportunities here, particularly in the health sector, Al-Mal quotes a source at the Korean International Cooperation Agency as saying. Foreign Minister Sameh Shoukry met with the chairman of the Export-Import Bank of Korea during his visit to the country last week to discuss financing for Korean projects in the country. Both parties agreed to push ahead with an agreement for railway traffic systems, which will be funded by a USD 115 mn loan from the Korean government.

EU Delegation begins second round of talks for three-year aid packages with gov’t
The European Union Delegation to Egypt is currently engaged in second round talks with the government to prioritize financial and technical aid to a range of projects over the coming three years, EU Delegation chief James Moran told Al Borsa. The delegation is expected to conclude talks with Egypt for new aid packages during the first half of 2016, Moran said, adding that the size of the aid package has yet to be determined. (Read in Arabic)


EGP 560 mn in renewable energy agreements
The New and Renewable Energy Authority (NREA) will ink 14 new agreements today to connect investor projects to the national grid at a total cost of EGP 560 mn. The agreements include the Egyptian Electricity Transmission Company building four transformer stations to connect 700 MW of capacity to the national grid, sources within the NREA tell Al Mal. Investors are expected to pay EGP 10 mn within days, and issue an EGP 30 mn letter of credit to the Ministry of Electricity, bringing the total to EGP 40 mn per agreement. The NREA also inked 24 agreements yesterday to connect the 1900 MW Benban projects to the grid. (Read)


DP World will upgrade Egyptian port on new Suez Canal
DP World and Sonker Bunkering Co. have entered into an agreement with the Suez Canal Authority and the Red Sea Ports Authority to upgrade the port of Ain Sokhna. The contract appears to be related to DP World’s plan to bid for the development of the second berth at Sokhna Port and a USD 200 mn investment in the port’s third berth. (Read)

China’s TEDA receives first parcel of land to develop Chinese industry zone
Chinese infrastructure giant TEDA Holdings signed for a 2 km2 plot of land to begin first phase development of the 6 km2 Chinese Industrial Zone north west of the Gulf of Suez, Al Borsa reports. TEDA had signed the contract for the project with the Main Development Company (MDC) — the primary development arm of the North West Suez Authority — back in 2013, to develop the zone in three equal phases. The project is scheduled to be completed in three years. (Read in Arabic)

The Holding Company for Construction and Development in talks for EGP 1 bn in equipment
The Holding Company for Construction and Development (HCCD) is in negotiations with five leasing companies to acquire new equipment for use on projects including the upcoming second phase of the National Roads Project, said HCCD Chairman Mahmoud Hegazy. HCCD is attempting to learn from its mistakes in the first phase, which it could not complete in time due to equipment-related issues. The company is also building a training academy, the first phase of which it hopes will be ready for use in January, and the second in April. It has invested USD 50 mn in the academy so far. (Read in Arabic)


Cotton Textiles Holding Co. will issue tenders for factories, land and equipment to the private sector
The Cotton Textiles Industries Holding Company (CTIHC) plans will tender contracts to operate factories, land and equipment belonging to state-owned spinning and weaving companies, CTIHC head Ahmed Mustafa told Al Borsa, saying the tenders will be open to private sector participation. Increasing the active participation of the private sector is key to the company’s plans to reform the ailing cotton and textiles sector, said Mustafa. (Read in Arabic)


Philips South Africa studying Egypt manufacturing opportunities
The Daily News Egypt quotes Philips South Africa CEO JJ Van Douneng as saying “We are in discussions in Egypt about local manufacturing around consumer products with local private companies,” but gives no specifics. The story, filed from a media junket sponsored by Philips, notes that the company “has a strong relationship with Egypt in the healthcare sector, according to Douneng. He explained that, with over 150 employees, Philips works closely with private and public sectors in the country.” (Read)

Egypt’s garments sector in crisis over EgyptAir cargo ban on commercial flights
“EgyptAir’s decision to suspend the shipping of commercial cargo on passenger flights bound for New York and Canada created a crisis in the export of Egypt’s spinning, weaving and garments sector, with Qualified Industrial Zones (QIZ) exporters being the hardest hit by the decision,” Aswat Masriya reports. While the head of the Readymade Garment Export Council estimates that only about 10% of Egypt’s monthly garment exports travel by air freight, the channel is “very important as it is linked with contracts that require rapid delivery of products.” (Read)


Competition Authority files antitrust charges against four pharma companies
The Egyptian Competition Authority (ECA) has filed antitrust charges against four pharma distribution companies yesterday, Al Masry Al Youm reports. The ECA signed off on a report by investigators that claims the companies coordinated discount prices to pharmacies, leading to a major reduction in the profit margins of smaller and medium-sized outlets, said Mona Al Garf, head of the CPA. CPA investigators worked with counterparts from the Supply Ministry on the case, Al Garf said. (Read in Arabic)


Real estate industry seeks relief from Housing Ministry-imposed late fees
The real estate industry is pressing the Housing Ministry to exempt projects that are more than 85% complete from late fees. Real estate developers presently pay a fine of 2-8% annually on the value of undeveloped land on which they’re experiencing construction delays. The real estate investment division of the Federation of Egyptian Chambers of Commerce is asking the Housing Ministry to exempt projects more than 85% complete from fines while focusing its efforts on those that are less than 60% finished. (Read in Arabic)


EFG Hermes Private Equity eyes renewable energy opportunities
The private equity arm of the regional investment bank is “is eyeing investment in North Africa’s renewable energy sector as countries diversify their energy mix to plug their power shortage,” according to a piece in The National quoting EFG Hermes Private Equity head Karim Moussa. The story quotes Moussa as saying “North Africa represents a prime opportunity for EFG as it looks to expand on its large direct investment platform present in Europe, known as Vortex, without identifying potential targets.” Vortex is the EFG Hermes vehicle that acquired last year a 49% stake in EDPR France’s wind portfolio. That investment, Moussa says, “has paid so far around EUR 20 mn in dividends and is expected to pay a net cash yield of over 10 per cent to its shareholders in its first year of investment in 2015.” (Read)

Emirates NBD Egypt looking to increase capital, launches loyalty program for HNW clients
The Emirates NBD Bank is looking to increase its capital in the coming period, said Emirates NBD Bank Egypt CEO Giel-Jan Van Der Tol, according to Al-Mal. The bank is studying different solutions to increase its capital including retaining some of the bank’s profits at the end of the current year, he added. The bank may also resort to its mother company to inject funds, preferably in USD, into the capital increase plan. The bank aims to increase its capital adequacy ratio to 12% in the coming period, to surpass the CBE required 10%. The news comes as Emirates NBD launched a new loyalty program to serve “the bank’s affluent customers, providing an opportunity to obtain a range of unique banking products and services less than the market prices,” the company said in a press release.


Orascom Hotels files for capital reduction
Orascom Hotels and Development filed yesterday with the EGX for a capital reduction in a bid to reduce its shares by 301K to 222 mn shares, AMAY reports. The move would bring its issued capital to EGP 1.1 bn. (Read in Arabic)


Eastern Tobacco chief Nabil Abdel Aziz has stepped down for health reasons and has been replaced by Mohamed Othman Haroun, according to a brief statement to the EGX.

Saying it is not asking for anything the state hasn’t already done for at least one fertilizer company, Egyptian Iron and Steel is demanding the government cut the cost of energy to the state-owned behemoth to USD 4 per mmBtu from the current USD 7 it pays, Al Borsa says. <snark>Because doing so won’t just make a loss-making company profitable, it will also fix our subsidy problem. Why didn’t we think of this before?</snark>

The world’s least-relevant tech giant is on the verge of selling itself, it seems: Yahoo’s board of directors will meet this week to consider selling the company’s core internet business while looking for ways to “make the most of its valuable stake in Chinese e-commerce powerhouse Alibaba Holding Group Ltd,” the WSJ says, breaking the story. CNBC has more if you’re looking for a take that isn’t behind a paywall.

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QUICK FACT: Egyptian t-bill and t-bond yields have remained roughly stable since the two largest banks in Egypt decided to introduce high-rate CDs almost three weeks ago.

USD CBE auction (Tuesday, 01 December): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Monday, 30 November): 8.60 (+0.10 from Thursday, 26 November, Reuters)

EGX30 (Tuesday): 6424.88 (+1.07%)
Turnover: EGP 308.3 mn
EGX 30 year-to-date: -28.02%

THE MARKET ON TUESDAY: With a month to go before year’s end, Egyptian equities crawled up from their multi-month-lows on the first December trading day, albeit on weak turnover. After yesterday’s cautious recovery, the EGX30 remained 28.0% down YTD making it among the world’s worst performing index — almost erasing from memory the fact that it was the planet’s best performer in 2014. With the day’s news dominated by the CBE’s actions, investors remained cautious, a fact made clear by low turnover. CIB, Orascom Telecom, Qalaa Holdings and Global Telecom were the EGX’s most heavily traded stocks on the day. At a market turnover of EGP 308.3m, local investors were the sole net buyers yesterday. Regionally, Saudi Arabia’s Tadawul and Dubai’s DFM both closed higher, as did Japan’s Nikkei, China’s Shanghai Composite and Europe’s Eurofirst 300.

Foreigners: Net Short | EGP -11.2 mn
Regional: Net Short | EGP -3.1 mn
Local: Net Long | EGP +14.3 mn

Retail: 64.4% of total trades | 64.0% of buyers | 64.7% of sellers
Institutions: 35.6% of total trades | 36.0% of buyers | 35.3% of sellers

Foreign: 25.8% of total | 24.0% of buyers | 27.7% of sellers
Regional: 5.2% of total | 4.7% of buyers | 5.7% of sellers
Domestic: 69.0% of total | 71.3% of buyers | 66.6% of sellers


With companies pricing the USD at 9.00-9.50 in FY2016 budgets, inflation is almost a fact, not a risk

In our latest communication to clients we expressed our deep concerns over Egypt’s exceptionally limited reserve buffer and escalating geopolitical risks. Our concerns have been indeed reflected in widely reported FX shortages, a steep increase in long-term deposit rates, a downward revision in Egypt’s outlook from “Positive” to “Stable” by S&P Ratings, and a steep correction in equities led by the index bellwether CIB. While these concerns are still valid, our views on equities have gone from bearish to neutral on what we view as a formation of a solid management team, particularly in the CBE.

We will shift from neutral to positive on equities if the current management team has been formed to execute aggressive fiscal and FX reforms on a “Fast Track” basis. The expedited launch of a social safety net, via the 10-20% slash in the prices of key food items sold in government-owned and private outlets, likely suggests that major reforms are imminent. We will be eyeing a one-off meaningful devaluation of the EGP versus the USD to a level close to 8.59-9.00 coupled with the launch of VAT and continued interest rate defense during 1H16. Based on recent company visits, most of the major companies operating in Egypt have based their 2016 budgets on a USD / EGP of 9.00 or 9.50. Some of them have actually executed price hikes accordingly, which suggests that the inflation shock is almost a fact rather than a risk. Accordingly, we highly recommend the adoption of a Big Bang approach followed by the pursuit of reform-linked funding from the IMF to trigger other private inflows. The time is ripe for ending the gradualist approach and the management team is well equipped to soften an otherwise hard landing. Tap here for the full story.


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Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.