French companies ink EUR 2 bn in agreements during Hollande visit

Water, regional cooperation talks with Sudan, Ethiopia: Irrigation and Water Resources Minister Mohamed Abdel Aati is in Sudan today to “discuss regional cooperation and water issues,” according to Al Ahram. Tomorrow he will head to Ethiopia for the Africa Climate Resilient Infrastructure Summit. A source said the visit is aimed at discussing technical disagreements regarding the Grand Ethiopian Renaissance Dam.

Across the pond, Democrat Hillary Clinton and Republican candidate Donald Trump are said to enjoy double-digit leads over their rivals heading into today’s primary in New York. Meanwhile we’re still digesting “Trumpism and Clintonism are the future,” an excellent think piece from the New America Foundation’s Michael Lind for the New York Times — definitely a must-read for anyone who has studied polisci, thrills at U.S. politics, has lived in America, et cetera.

And for the journalism geeks among you: The 2016 Pulitzer Prizes are out. It’s the 100th time they’ve been awarded, and the winners are a reminder of the power of courage to effect change. The New York Times (which won two nods) has a great story wrapping up the winners, and the full list is here on the Pulitzer website. And for the history and economy fans among you: Hamilton, the hip-hop musical that delves into the saga of the “founding fathers” of the U.S. that includes a deep dive into economics, took home the prize for drama.

Renaissance Capital’s inaugural Egypt Corporate Access Day begins tomorrow in Cape Town and will connect South African investors to key decision makers from select high-profile companies in Egypt. The two-day event ends Thursday.

Also tomorrow: Parliament will vote on the Ismail government’s agenda, Al Masry Al Youm quotes Speaker of the House Ali Abdel Aal as having said.

US Secretary of State John Kerry is expected to arrive next Wednesday to meet with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry. So far, the agenda is unclear, with Al Masry Al Youm only stating that they will discuss “bilateral ties.” Kerry will then join US President Barack Obama in Saudi Arabia for a summit in Riyadh.

French companies signed c. EUR 2 bn worth of contracts in fields ranging from energy to biometrics yesterday as French President François Hollande wrapped a two-day visit to Egypt. The only outstanding question at this point: Did two two sides reach an agreement on EUR 1 bn in arms sales, including at least two corvettes and a military communications satellite system? The contracts had been widely expected, but we’ve so far seen little news. Judging from this Reuters report and a story from La tribune we picked up yesterday, our hunch is that the satellite comms system agreement went through, but that the corvette deal is still the subject of talks.

GE signs a USD 250 mn substation contract in Egypt: GE announced the signing of a USD 250 mn contract with the Egyptian Electricity Transmission Company (EETC) for substations in “Mostathmereen, Beni Suef Industrial, Ismailia East and Temay Alemdeed.” The substations will help connect 7 GW to the national power grid. “French components make up approximately 50% of the total project scope including the Gas-Insulated Substations technologies to be installed at the substations, which are manufactured and assembled in France. The project is being executed in a consortium with Rowad Modern Engineering” and is expected to create 50 permanent jobs and 1,000 indirect jobs domestically. All substations are expected to be completed by the end of 2017.

Energy agreements signed on Monday at the French-Egyptian business forum included one by French energy company Engie to import LNG in Egypt with EGAS, Reuters reports. Engie also signed a cooperation agreement for the development of renewable energy with Egypt’s National Renewable Energy Association and the Egyptian Electricity Transport Company.

Did Hollande just promise Egypt assistance on nuclear energy? President François Hollande indirectly hinted that France would help Egypt develop its civilian nuclear energy capabilities at a meeting with President Abdel Fattah El Sisi during the French-Egyptian business forum on Monday, Al Masry Al Youm reports.

Safran signed an agreement with the Egyptian government at Monday’s Egyptian-French business forum to provide and install biometric and document scanning equipment at 22 land, air, and seaports, Al Mal reports. The agreement will also see Safran Group help the government develop a system to issue visas to foreigners online. The company will supply the Egyptian Company for Tracking Services and Information Technology with fingerprint scanners and smart cards for EUR 218 mn and also be part of a project to upgrade national ID cards.

Nile, Gemini, Kanoo, and IFC to invest in AXA Egypt: Also coming out of the forum, AXA Egypt signed on Nile Holding Investments, which counts Onsi Sawiris as a majority shareholder, the OTMT-owned Gemini Holdings, Bahrain’s Kanoo Group, and the International Finance Corporation as shareholders, Al Borsa reports. Once details on ownership stakes are determined, the new shareholder structure will be solidified, which is expected to take place before the end of the year, said AXA Egypt’s CEO Hassan El Shabrawishi.

The GE, Safran Group, and Engie agreements were among the 20 listed in the official roster of agreements signed during President Hollande’s visit and published on the French embassy’s website in both French and Arabic. Some of these were noted during our coverage yesterday.

French investors are forgoing Egypt’s stock market for Sub-Saharan African and other North African markets because of the FX overhand and security and political risks that plague Egypt, several stock market experts tell Al Mal in a piece that delves quite deeply into the issue. Economists interviewed also added that most deals signed during the French president’s visit were not new investments, but came from French firms that already had a foothold in Egypt looking to expand.

Just when you thought the visit was going well: The French press is ripping into the Egyptian army band for “massacring” (run time 1:15) La Marseillaise, the French national anthem, when it was played for Hollande during his visit. Last year, the band welcomed Russian President Vladimir Putin in asimilar fashion (run time 1:12). For reference, here’s what the French (run time 1:03) and Russian (run time 1:15) national anthems actually sound like.

EGP hits as high as USD 10.73 on black market: The EGP weakened against the USD on the parallel market yesterday to 10.50-10.65 compared to 10.25-10.28 last week, eight traders told Reuters. Meanwhile, Al Borsa says the rate hit as high as 10.73. Sources we spoke with said there was little-to-no liquidity available even at that price.

The UAE’s National Food Products Company (NFPC) is close to completing its acquisition of Qalaa Holdings’ Enjoy, Al Mal says. Sources told the paper NFPC has completed the due diligence process successfully and the parties have reached a pricing agreement, but it is yet to be disclosed. The agreement, for which Pharos is Qalaa Holdings’ financial advisor, is expected to be finalised by the month’s end, Al Mal added. As our GCC edition noted yesterday, NFPC itself is the subject of takeover talk, with Saudi’s Almarai said to be interested in taking a controlling stake.

Egypt is bucking the global trend of reduced oil and gas spending, an upstream analyst at Wood Mackenzie tells The FT’s Heba Saleh, “because the gas price for newer contracts is relatively high and you are insulated because there is a price floor and a ready market. EGAS [the state gas company] is willing to negotiate the price to encourage investment.” Even with the accelerated development of Zohr, Egypt is not expected to return to being a gas exporter straight away as domestic consumption has been increasing, partly driven by land reclamation and the inevitability of expanding desalination projects. Still, future plans to transform Egypt into a gas exporting hub are “viable,” analysts tell Saleh, with former EGAS Chairman Mohamed Shoeib adding that Egypt “represents an exit for gas from Cyprus and Israel” and that the plan is achievable within five years.

The CBE issued a new banking directive requiring banks to build up their capital conservation buffers. According to the directive, banks must hold a capital conservation buffer of 0.625% from January 2016, increasing incrementally by 62.5 bps annually until it reaches 2.50% by January 2019. The CBE says the banks should build up the buffer using their annual net profit.

NBE has frozen the accounts of Misr Ins. and Hussein Salem’s East Mediterranean Gas for allegedly failing to comply with an Economic Court’s ruling that both companies owe NBE USD 174 mn in unpaid debts plus 0.25% interest, Al Mal reports. NBE’s legal counsel Emad Faseeh said he did not receive a notice of appeal from either company, adding that the deadline for filing an appeal is 23 April. The freeze would effectively halt all ins and re-ins payouts to Misr Ins. clients, said Mohamed Khalifa, the company’s deputy CEO. He added that the move was a huge blow to the economy as the company holds the largest ins portfolio in the country with bns in liquid assets now at stake. As we noted last month, Khalifa had stated that Misr Ins would file an appeal.

New listing regulations limiting cross-ownership of related parties adopted by the Egyptian Financial Supervisory Authority aren’t targeting Beltone’s acquisition of CI Capital and Arab Finance, said EFSA head Sherif Samy. He said the regulations do not target any one in particular but aim to strengthen minority shareholders rights, adding that the rule only affects a few listed companies and should not have an adverse effect on the market, Al Masry Al Youm reports. EFSA had passed new listing regulations on Sunday that prevent companies from owning more than 10% of a sister company controlled by the same corporate parent, counting shares purchased by parent companies in subsidiaries as treasury stock, and requiring general assembly approval for the sale more than 50% of a company’s non-liquid assets, Al Mal reports.

The government has released its plan to resurrect the ailing tourism sector and bring in 10 mn tourists per year, Al Borsa reports. The strategy, due to take effect in six months’ time, calls for setting new metrics and targets for arrivals from each market, whether regional, frontier, or well established ones such as the EU and Russia. Using these, the tourism ministry plans to target a marketing campaign to each target demographic within that market. The plan will also revamp Egypt’s tourism digital portals and build well-designed websites for each tourist destination and resort. Egypt also plans to partner with international online booking and travel agencies to market the portals. This strategy will go hand in hand with ongoing plans to develop and modernize infrastructure at key destinations.

Telecom Egypt joins subsea cable consortium: MTN Group, PCCW Global, Saudi Telecom Company (STC), Telecom Egypt (TE) and Telkom South Africa have signed an MoU to construct the new “Africa-1” submarine cable system. This consortium-funded system will connect Africa with the Middle East and South Central Asia and provide onward connectivity to Europe, according to a release by PCCW Global. “Africa-1 will have at least 3-fiber pair core that extends more than 12,000 km along Africa’s East Coast towards Saudi Arabia, Egypt and Pakistan, with up to an additional 5,000 km for branches” and will be initially equipped to “accommodate several terabits of capacity from day one.” The construction and maintenance agreement for the cable system is expected to be signed by June, with a target ready for service timeframe of 3Q2017.

Parliament to puppet: This means war (again): Parliament is ‎ready to take legal action against television programmes that "direct criticism at MPs ‎in a way which exceeds the limits of ‎freedom of expression,"‎ according to statements from the house speaker made on Monday , Ahram Online reports. The statement was an acknowledgment of complaints presented by MPs about the Abla Fahita Show after the host insulted parliamentarians. We remind readers fortunate enough not to know that Abla Fahita is in fact a puppet. That still has not, however, stopped her (it?) from being accused of violating public morality and of being behind a secret terrorist conspiracy.

Saudi Arabia dominated foreign business coverage this morning after the kingdom quashed an agreement to suspend oil output at the Doha meeting on Sunday due to Iran’s refusal to attend. Bloomberg writes that “in doing so, the 30-year-old son of King Salman upended the Saudis’ decades-long approach of separating commercial from political considerations.” The move is “an indicator of how much [Saudi’s] oil policy is being driven by the ongoing geopolitical conflict with Iran,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. Against that backdrop, we’re recommending the FT’s “The unpredictable new voice of Saudi oil,” (paywall)which says the meeting left Ali al Naimi, the kingdom’s oil minister for the last 21 years, “looking increasingly sidelined.” “Asked one unnamed Gulf delegate: “How can they go from agreeing to everything on Saturday and turning everything upside down on Sunday?” Said one analyst: “One of the main conclusions of the Doha meeting is that the Saudi regime has become very unpredictable.”

Human rights in question amid French, German visits: Despite signing agreements worth more than EUR 1.4 bn with French firms, and receiving a proposal to mediate with creditors from Germany, Egypt could not escape criticism of its human rights record, Bloomberg reports. German Economy Minister Sigmar Gabriel extended the proposal to mediate with the IMF, Paris Club, and the European Union, but urged German companies to address human rights issues in contacts with Egyptian counterparts.

Running club Cairo Runners got some coverage from The Economistin a piece that in seven short paragraphs managed to also swing between the problems of harassment on Egyptian streets, the growing onset of diabetes, as well as a political statement. The Economist says President Abdel Fattah El Sisi met the Cairo Runners group on one of their runs and asked what they were doing, but the writer jumped quickly into saying that “doing more” will require El Sisi to “overcome his fear of large groups of motivated young people.”

Johnny Depp and his wife Amber Heard pled guilty on Monday to bringing the couple’s dogs to Australia without the proper paperwork while Depp was filming his fifth (fifth?) Pirates of the Caribbean movie. (Watch the apology, running time: 42 seconds, brought to you by the Australian Government Department of Agriculture and Water Resources)

Australia’s strict biosecurity laws were effectively examined in the 1995 Simpsons episode, Bart vs. Australia (Watch, running time: 1:49)

Egypt and Germany signed two cooperation protocols. One would see 250 engineers and technicians trained in Germany over 10 years at a total cost of USD 150 mn, which will be funded by Germany and supported by the Tahya Misr Fund, and the other to build a solar park in Aswan at a total cost of USD 85 mn, Al Masry Al Youm reports.

President Hollande met with Prime Minister Sherif Ismail and several others cabinet members to talk renewable energy projects, water irrigation, and how to increase French tourists to Egypt on the second day of his visit to Cairo. During the meeting, Ismail said GDP growth is set to hit 5.2% by the end of 2016, which is when several mega projects should be up and running, particularly those in the transport, agriculture, and social housing sectors. Hollande also visited the House of Representatives to sit down with House Speaker Ali Abdel Aaal.

The official unveiling of the French economic zone in Alexandria will be in June, said Mahmoud al Qeisy, head of the French Chamber of Commerce, Al Borsa reports. A preliminary agreement on its location has been reached, Al Qeisy added. The sectors and industries that will operate there, in addition to the size of the zone, has yet to be determined, he said. Five French companies in textiles and food industries have expressed interest in setting up shop in the zone with eyes toward exporting to France and Asia.

Civil Aviation Minister Sherif Fathy recently met with Canadian Ambassador Troy Lulashnyk to discuss cooperation and investment opportunities in the field of air transport, Al Mal reports. The pair also discussed increasing Canadian tourism inflow to Egypt.

Not surprisingly, the Giulio Regeni case dominated discussions during the Egyptian parliamentary delegation’s visit to the European Parliament last Tuesday and Wednesday, according to a report issued by the Egyptian delegation. The Egyptian delegation assured the Italian MPs of the European Parliament that Egypt’s House of Representatives will help ensure the transparency of the Regeni case. In response to inquiries about the investigation, the delegation simply stated that it was not authorized to comment. The delegation insisted that European-Egyptian relations must not be jeopardized by attempts to use human rights to sabotage bilateral ties. According to the report, the delegation helped dispel “negative propaganda” against Egypt in the media and built bridges with their European counterparts.

Rockhopper is amending the terms for its acquisition of a portfolio of non-operated production and exploration interests in Egypt from Beach Energy. Rockhopper will acquire the entire issued share capital of Beach Petroleum, which includes a 22% interest in the Abu Sennan concession and a 25% interest in the El Qa’a Plain concession. An agreement was originally reached in August 2015, but “due to the exercise by one of the partners of pre-emption rights on the Abu Sennan concession, as announced in September 2015, it was not possible to complete the acquisition on the original terms.” The acquisition, in its new form, is anticipated to complete in mid-2016. (Read)

Carbon Holdings is looking to complete negotiations with four foreign banks for a USD 5.2 bn loan to finance the Tahrir Petrochemicals complex in Ain Al Sokhna by the end of the year, company CEO and Chairman Basil El Baz told Amwal Al Ghad. The banks include the China Development Bank and the U.S. Export-Import Bank, he added. The time frame for the project is 48 months and an estimated cost of around USD 7.5 bn, he said. (Read in Arabic)

*** Further reading in Energy: Nagy Iskander writes in Daily News Egypt about the shift in Egyptian gas agreements from production sharing to a tax and royalty system.

Iskander says the shift came “with the prospecting and production of most of this superficial gas, Egypt entered a new era of deepwater gas, produced under high pressure and high temperatures. Applying Production Sharing Agreements to deepwater gas has clearly proved the least optimal system for the future and the government was compelled to consider other systems, such as tax/royalty agreements.”

Heliopolis Housing will sign an EGP 200 mn agreement with the National Contracting Company to build a wastewater plant in New Heliopolis, Al Borsa reported. Construction is expected to begin next month, with the duration of the project estimated at 18 months, said Chairman Hani El Deeb. Heliopolis Housing has recently tapped the National Contracting Company to build two electricity distribution plants at New Heliopolis with a preliminary investment cost of EGP 230 mn, he added. (Read in Arabic)

Domty reached an agreement to market its products in Russia. The Egyptian dairy manufacturer said it closed a four-year, USD 10 mn agreement with Russian retailer Magnit, according to a bourse statement. Domty’s exports were valued at EGP 83 mn in 2015, compared with EGP 93 mn in 2014, according to a Mubasher report quoted by Al Borsa, meaning the Russian contract alone is worth more than last year’s entire export value.

Egypt is set to up spending on healthcare and education in the FY2016-17 budget, with budget allocations for healthcare rising 8% to EGP 53.3 bn and spending on education less than 5% to EGP 104 bn, Deputy Finance Minister Mohamed Moaeit said in a statement issued Monday. This would put healthcare spending at 1.6% of GDP and education at 3.1% of GDP, which planning minister Ashraf El-Araby had said is expected to reach EGP 3.3 tn in FY2016-17. Constitutionally, the government is required to spend 3% of GDP on healthcare and 4% on education every year.

The Health Ministry has reopened negotiations with two suppliers on the price of baby formula, despite recently agreeing to a price of EGP 29.50 per pack, Al Borsa reported. The ministry is looking for a price below EGP 27, sources said. The ministry had previously tasked one of the companies with importing 18 mn packs at a cost of EGP 531.0 mn and cancelled its tender with the other following pressure from professional syndicates. (Read in Arabic)

Real estate developers could resort to partnerships to increase their land portfolios despite continuing land price increases, Wadi Degla Developments CEO Maged Helmy said. Daily News Egypt says Helmy believes “public corporations should offer land holdings to the private sector to form ownership partnerships” as they do not have the requisite capacity to develop these lands, adding that a “partnership will increase profits and the rate of development.” The idea is supported by Magued Sherif, CEO of SODIC, which is already engaged in a partnership agreement with Heliopolis Housing. (Read)

The tourism committee of the Egyptian Businessmen’s Association (EBA) is calling on the government to exempt Saudi investors from regulations that restrict foreign ownership in Sinai, Al Shorouk reports. The committee’s head Ahmed Balba’ believes such a move would not only facilitate the construction of the King Salman bridge but also encourage more Saudi investors to enter the Sinai tourism sector. Commenting on the government’s recently announced tourism strategy, the EBA wants revenues to be the metric that defines the sector and not number of tourists. Other recommendations include hiring an international firm for airport security and relieving the sector of its financial responsibilities for two years without additional fees, Al Borsa reports. The recommendations also include a 10-year tax exemption for tourism projects and approving the transformation of the Ras Benas military airport to a civilian one.

Developing historic state-owned hotels across Egypt, which are in dire need of investment, was the topic of discussion between Public Business Sector Minister Ashraf El Sharkawy and Marriott International’s Middle East and Africa President and Managing Director Alex Kyriakidis. The pair also discussed hotel investment opportunities in general, with El Sharkawy talking of establishing a training center to train employees at state-owned hotels. (Read in Arabic)

The results of airport security inspections conducted by the Russian delegation that came to Cairo yesterday will be announced within a week, after the delegation returns to Russia, announced Russian Deputy Transport Minister Valery Okulov, RT reports. (Read in Arabic)

Having a fourth mobile phone carrier in Egypt will be a failure, and if it passes the new company will either go bankrupt or be swallowed up by an existing carrier, said former Chairman of Mobinil (now Orange Egypt) Alex Shalaby. The government should instead focus on issuing 4G licenses, Shalaby added in an interview on the sidelines of a lobbying meeting in the United States. (Read in Arabic)

The Tax Authority is assessing the financial impact of having an official exchange rate that is different that the parallel rate on doing business, Al Mal reported. The authority is looking into ways it could give companies having to source foreign currency in the black market the adequate tax treatment. The head of research at the Tax Authority said the impact will not be felt in the current tax season, but will play a role in subsequent tax audits. (Read in Arabic)

Ayadi Company for Development and Investment plans to form a EGP 5 mn asset management company in partnership with the UAE’s Al Futtaim Group and French infrastructure multinational Veolia, Al Mal reports. The company will help manage government assets including antiquities, historical landmarks, schools, and hospitals. The company is also looking at 40 projects and businesses to employ its EGP 410 mn in capital, primarily in the industry, tourism, agriculture. and services sectors, said Ayadi Chairman (and former investment minister) Osama Saleh. Ayadi, which was formed back in December 2014, is a public sector investment firm that holds majority stakes in different projects run and administered by the private sector. Planning Minister Ashraf Al Araby called it a “leading component” of Egypt’s Vision 2030 development plan.

While the Central Bank of Egypt asked banks to look abroad for FX as a way to overcome the USD shortage, local banks are choking on the differential between the high rates of interest paid on USD deposits in Egypt compared with those at banks abroad. The Daily News Egypt story quotes Zeinab Hashem, CEO and managing director of ADIB Capital (the investment arm of Abu Dhabi Islamic Bank.

The government has tapped Falcon Group to establish and run the security firm that was announced following the Metrojet crisis in October 2015, sources tell Al Mal. Falcon National Company for Security will be established to handle airport and tourism area security. Falcon Group will contribute 25-30% of the new company’s capital, with the state operating 70%, of which 5% belongs to the Tourism Ministry. The firm will handle security at the Marsa Alam, Sharm El Sheikh, and Hurghada airports in the first phase, before expanding to the remaining airports. (Read in Arabic)

Health service app Es3fne won first place at the the US government and British University of Egypt co-sponsored The StartUp Weekend event, according to the US Embassy in Cairo. Es3fne is an “an emergency health service app that notifies relatives, locates the nearest hospital, and provides first aid instructions.” The team was awarded five seats to the Oasis 500 acceleration program.

Wamda’s Alaa’ Odeh reviewed Jumpsuite, an Egyptian fitness app that offers an online proprietary software used by trainers and nutritionists to build custom client programs, view data analytics of client progress, and have full control over their own products; and a mobile app interface that allows clients to follow their program and track their progress. It also features an online marketplace to navigate, buy, and review programs from hundreds of industry professionals and gyms around the globe.

Somalia’s government said on Monday that 200-300 Somalis may have drowned in the Mediterranean Sea while trying to cross illegally to Europe from Egypt, according to information it had gathered from its embassy in Egypt, Reuters reports. Egyptian, Italian, and Greek officials were unable to confirm a BBC report that said up to 500 people had died the vessel, which capsized off the coast of Egypt, according to the 41 survivors. Officials in Egypt did not respond to Reuters inquiries and Italy’s coast guard said it had no information about a shipwreck. The Greek coast guard also said it had no news.

Smokers beware: Eastern Tobacco faces as much as EGP 520 mn in new costs in its next fiscal year as a result of new tariffs on tobacco and the impact of devaluation, according to remarks by the company’s chairman picked up by Al Borsa.