Are Russian security and air safety inspectors coming?

Egypt has met all of Russia’s requirements on airport security and the Civil Aviation Ministry expects a Russian delegation to arrive for an inspection, Ismail Abu Elezz, the CEO of the Egyptian Holding Company for Airports and Air Navigation, said on Monday, TASS and Aswat Masriya report. Russian security and air safety inspectors need to sign-off before Russian flights resume to Egypt can resume. Abu Elezz said modern screening devices and surveillance cameras had been installed at a total cost of about EGP 417 mn. He gave no time frame on when to expect the Russian delegation’s visit.

Merkel’s foreign affairs advisory, head of German Central Bank in town for talks: Foreign minister Sameh Shoukry will meet with Angela Merkel’s Foreign and Security Policy Adviser Christoph Heusgen today for talks on regional political issues, Al Masry Al Youm reported. Heusgen arrived in Cairo yesterday for a two-day visit, Ahram Gate reported. Also today, members of the House of Representatives will meet with Heusgen and German Central Bank President Jens Weidmann for one-hour talks on economic issues, according to Ahram Gate. Among the MPs invited are Mohamed Fouad, Karim Darwish, Karim Salem, Dalia Youssef and Amr Sedky.

Shoukry to meet Obama’s anti-Daesh envoy today: Foreign Minister Sameh Shoukry will meet today with the U.S. Department of State’s Special Presidential Envoy for the Global Coalition to Counter ISIL Brett McGurk (Twitter) for talks on counter-terrorism issues, Al Masry Al Youm reported.

The next session in the trial of former Central Auditing Organization chief Hisham Genena is due to take place today. The former judge faces up to one year in jail on charges he spread false information and “disturbed the peace” by estimating that corruption had cost the state as much as USD 76 bn.

In the lineup for this week:

• Obour Land will file to offer 25% of its shares on the Egyptian Exchange this week, according to remarks by Chairman Mohamed Hamed to Al Borsa.
• Thursday, 23 June is Brexit Day as voters in the UK head to the polls to decide whether or not to remain in the European Union. An opinion poll yesterday suggested the “remain” campaign had regained the lead heading into Thursday’s poll.

Budget debate: The House of Representatives is set to discuss the state budget in four consecutive sessions starting Sunday, 26 June, Al Mal reported. Finance Minister Amr El Garhy presented an overview of the FY2016-17 budget to the House in May.

BP, together with EGAS, has sanctioned the development of the Atoll Phase One project, which is an early production scheme that will bring up to 300 mcf/d gross of natural gas to the Egyptian domestic market starting in the 1H2018, BP announced. “Our confidence in the prospectivity of the area along with our ongoing commitment to Egypt and our successful history of partnership with the Ministry of Petroleum, EGPC and EGAS is allowing us to fast track Atoll from discovery to production in less than three years which is a significant achievement,” Hesham Mekawi, Regional President, BP North Africa commented. “Atoll Phase One is an early production scheme (EPS) involving the recompletion of the existing exploration well as a producing well, the drilling of two additional wells and the installation of the necessary tie-ins and facilities required to produce from the field.” BP has a 100% interest in the Atoll concession.

Egyptian-American Enterprise Fund unveils three investments, has a “promising pipeline” in high-impact sectors. EAEF Chairman Jim Harmon’s semi-annual letter to stakeholders, to be published on Wednesday, will announce three high-profile investments, two of them in tech sectors, according to an advance copy of the letter provided to Enterprise. The US-government-funded EAEF invested USD 76 mn last year in financial services outfits Sarwa Capital and Fawry. So far this year, Harmon notes, the two are “outperforming targets in existing business lines” and have “introduced new products, improved corporate governance, and enhanced their operational frameworks.” EAEF has built “a promising pipeline of investment opportunities by focusing on high impact sectors … including manufacturing, logistics, food & beverages, renewable energy, pharmaceuticals and financial services.” Among the three investments the fund has closed so far this year:

• USD 10 mn in Tanmiyah Ventures, a mid-cap fund set up by former EFG Hermes Head of Investment Banking Ahmed El-Guindy that will invest in “early stage companies that add to Egypt’s industrial base and export potential”;
• USD 10 mn in Algebra Ventures, which will invest in “tech startups that address the needs of Egyptian consumers”;
• USD 1.2 mn in SmartCare, its first investment in a “tech-enabled healthcare startup.”

Read Harmon’s letter to stakeholders in full here (pdf).

Domestic arbitration of any disputes arising under the feed-in tariff system for renewable energy is “non-negotiable” and not up for discussion, said a senior official at the New and Renewable Energy Authority (NREA). A decision on the issue is the purview of President Abdel Fattah El Sisi and not the Electricity Ministry, the unnamed source added. NREA head Mohamed El Sobky has refused to comment on the issue, and according to Al Mal, the ministry appears to be not speaking to the media on the matter. As we noted yesterday, the European Bank for Reconstruction and Development and OPEC Fund for International Development have notified Orascom Construction they are officially backing out of financing a USD 80-90 mn solar power plant after failing to reach an agreement on with the Electricity Ministry on a contractual arbitration method.

MOVES- Soha Soliman, head of the Social Fund for Development, will be appointed Vice Chairperson of Banque du Caire “within days,” sources told Al Borsa.

Finance Ministry tries to meet constitutional spending quotas, exposes odd fiscal practices in the process: The Finance Ministry is still scrambling to meet the constitutionally mandated spending quota of 10% of GDP (or GNP of this fiscal year … maybe next fiscal year’s … maybe the calendar year’s … maybe using real rates or adjusted for PPP, no one knows) on health and education, Al Mal reports, with Deputy Finance Minister Ahmed Kouchouk proposing to reclassify some misappropriated spending to reach the target. Expenditure on military hospitals is categorized under security spending and Al Azhar’s under religious affairs — both items that could go under health and education, he said. Amending this odd accounting will not just curb growth in budget deficit, but will also allow for more oversight on spending — and make more effective allocations possible. Godspeed, Mr. Kouchouk.

Meanwhile, it looks like the legislative deadlock on the Civil Service Act is unlikely to break anytime soon after the House Manpower Committee voted to set annual raises for bureaucrats at 7%. The government had set the rate at 5%. Further, committee members have issued statements telling the Finance Ministry to reverse its position on the 10% annual bonus ordered by President Abdel Fattah El Sisi last year, Al Shorouk reports. On the watch of former minister Hany Dimian, the Finance Ministry had issued a proclamation stating that the bonus was for state employees not covered by the Civil Service Act, prompting widespread protests and strikes by public sector workers last summer.

If that wasn’t enough, Parliament is looking to complicate the already contentious issue of ergot in wheat imports. A number of MPs issued “scathing” criticism of the government for accepting wheat with any ergot whatsoever, Al Masry Al Youm reports. In an attempt to use Monday’s hearing as an opportunity for grandstanding (we should be thankful that some even mustered the strength to attend), MPs expressed their heartfelt concerns about the health impact of ergot. To make things even more ridiculous, it was none other than Moustafa Bakry, who criticized the sacking of the former Agriculture Quarantine Authority head Saad Moussa for his zero-tolerance towards ergot. (Thankfully the story broke last night, as the mere mention of Bakry’s name would have been sufficient for us to have thought thoughts that would have broken our fast…)

Qalaa Holdings’ USD 3.7 bn Egyptian Refining Company is expected to begin production in June 2017, said Qalaa co-founder and managing director Hisham El Khazindar. El Khazindar also reported that the refinery will produce 4.6 mn tonnes of refined products per year, an increase from the 4.2 mn tonnes which Qalaa had previously reported, according to Al Shorouk. Qalaa Holdings subsidiary ASCOM is expected to finalize licensing for its gold mining concession in Ethiopia next June, said El Khazindar. It will take 12-18 months to make the mine operational, with full production expected to begin in 2019. He added that ASCOM is also looking to expand its calcium carbonate production. Meanwhile, other exits of non-core subsidiaries are in the works, he said, adding that Qalaa will prioritize repayment of foreign-denominated debt of USD 200 mn to local and foreign lenders in an attempt to reduce its overall liabilities to EGP 4 bn by 2018, from a current EGP 6.5 bn, AMAY reports.

Brexit and MENA: The direct impact of Britain leaving the European Union would be “limited,” EFG Hermes Head of MENA Strategy Simon Kitchen wrote in a strategy note released yesterday. More important for MENA markets will be the impact on oil prices, financial markets, and European and global growth as a Brexit would increase global volatility. “Retail and high net worth investors (owners of significant capital in the GCC) are likely to show greater risk aversion in the face of [developed market] political uncertainty … Such returning capital could help stabilise MENA asset markets in the event of a ‘yes’ vote, balancing the impact of lower oil prices and rising asset price volatility over time,” Kitchen adds. He notes that, with the vote results set to be announced on Friday, MENA markets will be amongst the last to react; “volumes and prices may fall towards the end of this week as investors take some money off the table ahead of the referendum results.”

Egypt’s Aircraft Accident Investigation Committee said yesterday morning they expected repairs to the memory units of crashed EgyptAir flight MS804’s black box recorders to be completed “within hours”, a high-ranking official told Reuters. As of dispatch, no reports on the findings had made local or international news. The committee will be able to determine after that whether or not data extraction will be easy.

Meanwhile EgyptAir agreed with insurance companies to compensate families of the victims with USD 25,000, chairman and CEO of EgyptAir holding company Safwat Mosallam said on Monday, according to Ahram Online. While the compensation is “temporary,” the “full amount will be offered once the settlement with insurance companies is completed in accordance with international insurance standards,” Mosallam said in press statements.

The average Egyptian spends 29 years of their life asleep, according to CAPMAS’ first survey on time use, Al Shorouk reported. If Egyptians on average live to be 71.5 years old, they also spend 6.8 years of their lives at work and 3.0 years in the education system — slightly under the 3.2 years spent on personal grooming. According to the survey’s press release, the average male employed by the formal sector works 7 hours and 58 minutes a day, compared to 6 hours and 25 minutes for females. However, females on average spend 4 hours and 57 minutes doing unpaid household work, compared to 1 hour and 42 minutes for men. The time use survey is Egypt’s first and was conducted in early 2015.

The GBP posted its biggest gain in eight years yesterday as a series of polls showed the UK is more likely to vote on Thursday to stay in the EU. The results showed risk appetite was “back with a vengeance” writes the FT’s (paywall) Dave Shellock. Still, all fears weren’t quelled as the European Central Bank’s top policymakers are set to meet today to discuss ways to “ensure that a possible British exit from the EU would not snuff out the eurozone’s tentative economic recovery,” according to the FT (paywall).

Russian President Vladimir Putin is considering selling part of Russia’s Rosneft to China and India to meet spending commitments “before his possible re-election bid in less than two years,” writes Bloomberg. “Russia has been seeking buyers for 19.5 percent of state oil champion Rosneft OJSC and is now indicating for the first time it would prefer a joint deal with the two nations driving growth in global energy demand,” two people familiar with the matter said. Officials in Moscow expect to raise at least USD 11 bn from the sale — a privatization record for the country. However, Kremlin spokesman Dmitry Peskov told reporters on Monday there was “no single preferred option” for the agreement.

Egyptians are parking their investments in property to protect against the EGP’s slide, Heba Saleh writes for the Financial Times. “The consequence [of the EGP’s devaluation] is affluent Egyptians increasingly seeking security in bricks and mortar, fuelling a boom in the undersupplied real estate market — one of the few sectors performing well… With the stock exchange volatile and expectation that the [EGP] will slide further, analysts say property is viewed as almost the only safe repository of value. Real estate prices have been rising by about 20 per cent annually in parts of Cairo.” The sales increases, despite hitting record levels according to one real estate company, is not reflected on their equities as investors are worried they might be caught at the peak of the tide, Saleh notes.

Khalil al-Anani writes about whether the Muslim Brotherhood is set to take the route of religion or politics in the Washington Post. “Abdel Fattah al-Sissi’s regime has put the movement under unprecedented pressure, with no communication between the leadership and the grass-roots organizers, which has led to significant differences and divisions within the Brotherhood. For the first time, the movement has two sets of leaders, inside and outside Egypt. They disagree over almost everything, from policy to tactics. With such a hostile and divisive environment, any decision to separate religion and politics would create more divisions and problems — and might even shatter the movement.”

The Panama Canal expansion and what it means for world shipping: The Panama Canal expansion opens in less than a week, and, as the Wall Street Journal notes, amid “one of the worst shipping industry slumps ever.” But beyond the short term, the nine-year, USD 5.4 bn expansion will see the canal add a third lane with a capacity to accommodate ships that carry up to 14,000 containers, up from around 5,000 currently. “The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, shortening the one-way journey by sea from Asia to the US East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic.” (Read The Panama Canal expands, the Wall Street Journal)

The potential MENA “megabank” in four charts: A potential merger of National Bank of Abu Dhabi and First Gulf Bank would give the combined entity a market value of c.USD 29 bn. The following four charts rank the ‘megabank’ against its peers in terms of market value, assets, loans and deposits. (Bloomberg)

Egypt is not negotiating to demarcate the maritime border with Palestine, Foreign Ministry spokesman Ahmed Abu Zeid told Anadolu, denying earlier reports. Abu Zeid said the reports are “unfounded” and that “there is no Egyptian position regarding maritime border demarcation with Palestine.”

The Foreign Ministry has condemned Qatar’s statement on the prison sentence handed to former president Mohamed Morsi, claiming that the response is not surprising coming from a country that has used its media outlets in a manner hostile to the Egyptian people and their state, according to a statement by Foreign Ministry spokesperson Ahmed Abu Zeid, Al-Shorouk reported on Sunday. Abu Zeid’s statement went out of its way to make clear, however, that Egypt’s relationship with the Qatari people will remain strong.

International Cooperation Minister Sahar Nasr met with a delegation from the African Development Bank to discuss the second tranche of a USD 1.5 bn loan to support the state budget, Al Shorouk reported. Nasr has requested to receive the USD 500 mn second tranche by September at the latest.

Schlumberger subsidiary OneSubsea has been awarded an engineering, procurement, and construction contract worth over USD 170 mn from Petrobel to provide the subsea production systems for the first stage of Zohr field, according to a statement. “The scope of contract includes six horizontal SpoolTree subsea trees, intervention and workover control systems, landing string, tie-in, high-integrity pressure protection system, topside and subsea controls and distribution, water detection and salinity monitoring provided by the AquaWatcher water analysis sensor, and installation and commissioning services.”

Saudi’s ACWA Power has established three new companies in Egypt, bringing its total to four including ACWA Power Egypt, with total capital of EGP 60 mn, Regional Director Hassan El Amin told Al Mal. ACWA Power will use its new subsidiaries to launch and execute projects worth a combined USD 12 bn in Egypt in the coming period. The companies are ACWA Gharib 1, ACWA Gharib 2, and ACWA Benban.

The Alexandria Petroleum Company has begun an EGP 600 mn upgrade of its production line and facilities that will be completed within two years, Chairman Nabil Afifi told Al Borsa. The upgrades include warehouses, boilers, production units, automation controls, cameras, fire safety systems, as well as water, gas, and electricity infrastructure, he said. Other state-owned petroleum companies have begun similar upgrades, including Enppi, Petrojet, Petromaint, and the Egyptian Maintenance Company for Petroleum Services, said Afifi.

Saudi’s Afandi Group is looking to invest USD 80 mn into building a solar panel factory in Egypt, CEO Al Rashid Al Kobsy told Al Borsa. The company is conducting a feasibility study on the project, which could produce 450k solar panels annually, he said. Afandi Group is in talks with 16 of the companies and consortiums that qualified for renewable energy projects in Benban to supply solar power panels, including Canadian Solar, Scatec Solar, and Nile Capital.

The Egyptian German Electrical Manufacturing Company (EGEMAC) was awarded two tenders by the Egyptian Electricity Transmission Company to build transformer stations at a total cost of EGP 200 mn, EGEMAC Chairman Medhat Ramadan told Al Mal. The projects include a 66/11 kV station in New Fayoum and a 220 kV station in Borg El Arab, he added. The companies are currently negotiating the terms of the contract, with the project’s duration set at eight months, he said.

The International Cooperation Ministry is seeking USD 200 mn in funding from the Japanese Bank for International Cooperation to back drinking water and sewage programs in underprivileged areas, Al Borsa reported on Monday. The loan will have a minimum interest rate of 1%; the tenor of the facility is still under discussion. The National Authority for Potable Water and Sewage would receive the larger part of the loan, while the Executive Agency for Water and Wastewater would also receive a tranche.

Both the Trade and Industry Ministry and Agriculture Ministry have said wheat supply reaching 5 mn tonnes is unlikely, Al Borsa reported. The claims come as the Supply Ministry downplays a corruption scandal amid calls for completing the electronic system connecting storage silos to mills to efficiently manage wheat supply. Only 4.088 mn tonnes of wheat were collected according to information collected from the agricultural directorates in the governorates, said Agriculture Ministry Spokesperson Eid Hawash. The numbers were corroborated by the General Organization for Export and Import Control, an affiliate of the Trade and Industry Ministry.

The Ismail government’s dropping of customs duties on sugar imports has saturated the market, Prime Holding says, Al Borsa reported on Monday. The government moved last month to exempt raw sugar imports from customs until year’s end and imposed an EGP 900 per-ton levy on sugar exports in a bid to keep prices in check. Prime Holding added that global prices have skyrocketed this year, making locally produced sugar a cheaper alternative.

Dairy products giant Juhayna has signed an EGP 15 mn per year cooperation agreement with e-payment firm Fawry to allow the company to collect payments from retailers through Fawry. Phase two of the agreement will include wholesale customers, according to Ahram Gate. Juhayna CEO Seif El Din Thabet also announced that the company will begin manufacturing products for ArJu Food Industries, a joint venture with Danish dairy food company Arla Foods, in 4Q2016, Amwal Al Ghad reports. The company said last month it would begin production in August. Juhayna is targeting revenues of EUR 100 mn by 2020, through the JV. On another note, Juhayna’s yogurt and juice sales increased 25% in Ramadan, Thabet said, according to Al Mal.

Environment Minister Khaled Fahmy met with 17 cement companies to discuss relying on alternative energy sources, including refuse-derived fuel (RDF), as a substitute for conventional fuel sources, Al Mal reports. The discussions looked into the possible sources for alternative fuel, the amounts that the cement factories will need, and challenges facing this conversion. The ministry is aims to diversify Egypt’s energy mix over the coming five years.

Abu Qir Fertilizers Company is looking to take up to a 10% stake in an EGP 1.9 bn phosphate fertilizers complex being built in Al-Wadi Al-Gedid with, Al Borsa reported. A joint venture between Phosphate Misr company, Abu Qir Fertilizers and the National Investment Bank, the company was due to be incorporated this month, Phosphate Misr chairman Khaled El-Ghazali had said in April, according to Al Wafd. Al Alam Al Yom has more.

The Egyptian Arab Land Bank (EALB) has received three offers from investment banks to set up the first real estate fund in Egypt in the near future, Chairman Abdel Meguid Mohy El Din told Amwal Al Ghad on Monday, without disclosing the names of the banks. The EALB had previously considered setting up a fund but pulled back because of discussion over the property tax, the newspaper quotes Mohy El Din as saying.

The Cabinet Economic Committee approved Transport Minister Galal Saeed’s proposal to build a shopping centre above Maspero metro station, which is part of the Third Metro Line’s third phase, Al Borsa reported. The project aims at generating revenues for the National Authority for Tunnels. The centre will be located in 26 of July street near the Nile Corniche. The committee also approved a licence for the National Authority for Tunnels to establish a joint stock company to expand its resources.

Egyptian Steel has opened talks for an EGP 600 mn syndicated facility to boost its working capital and complete an investment plan for its new factory in Beni Suef, sources told Al Mal. The syndicate includes Banque Misr, Audi Bank, and the Egyptian Arab Land Bank, the source added. Egyptian Steel had obtained EGP 1.07 bn in Islamic financing from the same consortium in 2014.

NBE and Banque Misr have raised interest rates for account holders. NBE raised rates on deposits by 0.75% and savings accounts by 1%, an official at the bank told Reuters. Meanwhile, Banque Misr has raised rates on deposits by 1% and savings accounts by 0.75%, reports AMAY. As we had previously reported, the CBE’s Monetary Policy Committee raised the benchmark interest rate by 100 bps on Thursday.

Egypt was ranked first in remittances in the Arab world and seventh internationally in 2015, representing 40.4% of total remittances to the Arab region, the Union of Arab Banks’ secretary-general Wissam Fattouh said in a statement, Al Masry Al Youm reported. Remittances by Egyptians working abroad amounted to USD 19.7 bn in 2015.

Egyptian and French naval forces began on Monday the Cleopatra 2016 joint exercises using the Mistral helicopter carrier Egypt received from France this month, Ahram Online reported. The exercises will last several days.

Falcon Group for security is set to sign an agreement with English security consultancy Restrata to provide training to the former’s employees, Al Borsa reported on Monday. Along with the training workshops, the English firm will also form a joint venture with Falcon that will manufacture security equipment in Egypt, as was previously reported. Falcon Group will also be launching a JV with the Egyptian government, Falcon National, today, in order provide security services at Sharm El Sheikh International Airport.

Clutching at straws: EgyptAir is offering customers who book tickets to any international destination, except for Jeddah and Medina, 50% off their second ticket. Al Ahram says the promotion is valid for bookings made from 20 June to 30 June for travel until 30 November.

An estimated 1,500 workers at potato-chip manufacturer Egypt Foods have been on strike since Sunday to protest the suspension of 21 workers for demonstrating on Wednesday, DNE reports. Workers said the Wednesday protest demanded “annual bonuses, a raise in salaries, and the dismissal of certain managers.”

We’ve found out who leaked the Thanaweya Amma exams: The Interior Ministry identified the person responsible for leaking the Arabic and religion exams as the head of the department of the “secret printing press of the Education Ministry.” The man is now in detention, Al Masry Al Youm reported.

Seven Egyptians went missing in Libya’s Misrata after being detained at Kararim Gate, Misrata’s south-eastern entrance, on their way back to Egypt, the Foreign Ministry said, according to Aswat Masriya. The ministry is in contact with Libyan officials to try to find where they are detained and how to get them released, the assistant foreign minister for consular affairs said in a statement.

The creator of one of our favourite newsletters is passing the torch: Mike Allen is leaving Politico’s Playbook, which he began nine years ago. “The inheritors of this wonderful franchise created more than nine years ago by the incomparable Mike Allen are two of our newsroom’s very best, Anna Palmer and Jake Sherman … They will be joined by a friendly face, Daniel Lippman, who will be a force multiplier for Jake and Anna just as he was for Mike,” a letter sent to Politico’s staff read. In recognition, The New York Times’ Jim Rutenbeg’s formatted his coverage of the news in Playbook style. Playbook notes that Allen will remain at Politico through the election, but after that he will help start a new media venture that will launch in early 2017.