First Olympic medal for Egypt in 2016 — first-ever for an Egyptian woman!

FiT sit-down today: Producers who have signed up under the feed-in tariff program for renewable energy will have a make-or-break meeting with Electricity Minister Mohamed Shaker today that will determine the medium-term future of the program after international lenders pulled packages — and most qualified producers bowed out of phase one. It was ostensibly a fight over international arbitration for any disputes arising under the system (the producers want it; the government doesn’t), but as we’ve previously explained, it’s got a lot more to do with the government having buyer’s remorse: It thinks it overpaid for contracts in round one. No more than 12 qualified companies are expected to close phase-one agreements by the 28 October deadline to be fully funded, making phase two critical to Egypt’s renewable energy ambitions.

Egyptian weightlifter Sara Ahmed, 18, won a bronze medal at the Olympics yesterday in the Women’s 69 kg class, becoming the first Egyptian woman to ever win an Olympic medal, Ahram Online reported. This is Egypt’s first weightlifting medal since 1948, even though two Egyptian weightlifters are likely to be handed medals since their competitors at the 2012 London Games were suspended in June and July. Ahmed’s win is also Egypt’s first at the Rio Olympics. Mohamed Mahmoud also won bronze in men’s 77 kg weightlifting class, USA Today reported. Also make sure to check out Ahram Online’s photo gallery: Egyptian weightlifters steal limelight with two bronze medals (navigate from the left-most square icon at the footer of the image, the images of Sara Ahmed and Mahmoud Mohamed start at Slide 12 and run until Slide 24).

Homework is coming: If you’re a Cairo American College parent, it’s your last weekend before the grind resumes — homework, tutors, weekend sports practice, college application essays, adjustment to middle school. This is your future. The kids are back to session on 16 August for new students, 17 August for returning students. Not a CAC parent? Your turn will come soon enough: MBIS is back on 21 August, BISC is back on 28 August, and both AIS and MES are back in session on 4 September.

** SAVING CAIRO FROM ITSELF

Mythbuster: Land registration has nothing to do with why Egypt doesn’t have a large-scale mortgage system

We said earlier in this series that offering a path to legal, affordable home ownership is among the keys to saving today’s Cairo and laying the groundwork for its future. But walk into any bank branch in Egypt and inquire about a 20- or 30-year mortgage and you’ll be met with some combination of raised eyebrows, confusion and general grumpiness.

Ask any expert in the field why you — or a member of your staff or the most humble of skilled tradesmen, for that matter — can’t find a mortgage product and you’ll be told it is not a regulatory issue. The problem is that too many homes are unregistered, too many buildings the subject of ownership disputes to make it safe for banks to write mortgages.

As a player in the real estate industry and with direct access to the nation’s banking professionals, what we’re about to say may surprise you: The problem is not the registration system. Need proof? Not terribly long ago, the Central Bank of Egypt released EGP 10 bn into the banking system to promote home ownership. The money was earmarked for mortgages on low-income housing. Qualified applicants were allowed household incomes of no more than EGP 8,000; the maximum mortgage was for EGP 300,000. How long do you think it took before the entire pool of funding was taken up and moved into the market? Two years? One year? Six months? Tap here to read the answer — and the rest of this week’s installment.

** This is part four of a five-part series by SODIC, a leading real estate developer and proud sponsor of Enterprise. Here, SODIC shares its view on how business and government can work together to save Cairo — doing good for more than 20 mn people and making a reasonable profit at the same time. Subsequent instalments will appear each Thursday morning, exclusively in Enterprise.

** Did you miss parts one and two in this series? Read them today.
Part 1: Why is your day in Cairo so hard — and what can we do about it?
Part 2: Egypt’s real housing sector: Market-based informality
Part 3: There’s a reason middle-income housing doesn’t exist — here’s how the government can fix it

The IMF delegation that is in town to discuss a three-year, USD 12 bn facility is reportedly unhappy about the shutting down of FX bureaus and the House of Representatives’ having passed tougher jail sentences for black marketeers, “a source close to the negotiations” tells Al Masry Al Youm. The state, the IMF is said to believe, has failed to provide an alternate mechanism to supply the market with FX: “Members of the delegation felt that the government’s attitude and behavior towards exchange operators might hurt the investment climate of the country,” the source added. Meanwhile, the delegation is said to be requesting a review of upcoming legislation that could tackle the FX crisis, including amendments to the Investment Law, the Central Bank Law and changes to the tax codes. As we noted yesterday, both sides have yet to settle on a timeline for devaluation.

The delegation’s comments follows the shutdown of 48 foreign exchange bureaux since the start of the year, a banking official told Reuters, “of which 26 have been closed permanently and 22 have been suspended for three months to a year.” Yesterday, we reported that parliament has increased jail time to people convicted of manipulating the market. Moves to shut down more FX bureaux through regulatory, legislative or other changes would be a “mistake,” former chief of the Federation of Egyptian Banks said, according to Al Shorouk: It would simply drive the parallel market underground and widen the gap between the official and parallel market rates, he says. Meanwhile, the foreign exchange division of the Federation of Egyptian Chambers of Commerce is planning to hold an emergency meeting Tuesday next week to discuss the state’s moves against its members, Al Ahram reports. The meeting will also discuss House Speaker Ali Abdel Aal’s vitriolic statements that FX traders should be executed, which was picked up by the New York Times.

… Al Masry Al Youm says greenbacks were going for EGP 12.75 per USD 1 on parallel market yesterday as the EGP weakened c. 10 piasters from Tuesday.

Meanwhile, industry is also concerned about the shuttering of FX bureaus, with some insiders telling Al Borsa that the black market is crucial because “the central bank fails to provide the sector’s needs.” Ezz Steel’s Sameer Noaman claimed FX bureaux “may be breaking the law by going beyond the specified margin between the official and parallel market rate…but [no action can be taken] against firms dealing with 70% of the economy…[such measures] are have the opposite of their intended effect, heightening the pressure on factories and the market…[with bureaux shuttered], parallel market services will transition to being carried out by phone.” Added Electrostar Chairman Mohamed El Menoufy suggests the CBE should allow banks to provide FX in part at the official rate and in part at the market rate.

The government is apparently planning to raise the price of fuel to industry in the coming few days as part of its ongoing talks with the IMF sources tell Al Shorouk. Energy-intensive industries will take it on the chin, it seems, while diesel will be spared to minimize inflationary impact on low-income consumers. The timeline for the removal of fuel subsidies is a point of contention between the government and the IMF, as the government wants to phase the cuts in over time, while the IMF is insisting that the sooner the better.

Okay, when exactly will these IMF talks end? Talks with the IMF may continue to the end of August, as discussions have still not moved to the size of the facility, a source with knowledge of the matter told AMAY: Negotiations have not progressed beyond the reform agenda. Elsewhere, through, the same paper cites other sources as saying 90% of the reform agenda has been agreed and that the size of the first tranche is expected to be USD 2.5 bn.

“Egypt does not have the luxury to wait any longer … and the outlook is not great,” Sebastien Henin, head of asset management at The National Investor, said on Bloomberg TV (Runtime 04:07). Host Yousef Gamal El-Din asked if Egypt could be on the cusp of a turnaround if an agreement with the IMF is reached given the performance of the equity market, but Henin disagreed, saying the figure mentioned is in local currency, but the USD-denominated performance is not “as good.” It’s too early to decide to buy now, Henin said, because the IMF agreement, if reached, is only one part of the story. He also warns of the potential for social discontent domestically if inflation rates accelerate further.

Government compromises on VAT rate as House remains intransigent: The government has reportedly offered to reduce the baseline value-added tax rate (VAT) rate to 12% if the House of Representatives would reduce the number of goods and services on the exemptions, sources from Parliament tell Al Borsa. Another MP said that the House is likely to refuse the offer: “We will refuse to trim the exemption list and will insist on adding seven more goods and services,” the MP added. These apparently include ginned cotton, vegetable oil and recycled goods. Another source claims that MPs will not accept a baseline rate higher than 12%.

Comprehensive tax reforms are coming: Deputy Finance Minister Amr El Monayer has confirmed that the ministry will be implementing new reforms throughout the tax system, Al Ahram reports. While El Monayer revealed little in the way of detail, he did hint that the overhaul would help state bureaucrats. His statements come as government employees continue to publicly decry the passing of the Civil Service Act. El Monayer added that these tax reforms have the backing of President El Sisi. We noted late last month that El Sisi had sanctioned a policy review of the tax system with an eye on how to encourage investment, expand the nation’s tax base and reform the tax bureaucracy.

Headline inflation rates remained unchanged at their seven-year high in July from June at 14.0% on “favourable base effects,” the CBE announced. Core CPI fell in July, registering 12.31% from 12.37% in June.

We should see inflation increase on the back of the Electricity Ministry’s 21-23% price hikes on electricity, as companies pass costs on to the consumer, Al Borsa reports. Ezz Steel’s Sameer Noaman said that the company cannot possibly decrease its consumption and the market will have to bear the brunt of the new cost of electricity. Sameer El Kholy, BoD Chairman of Misr Chemicals Industries, said that the cost of the company’s products would have to rise by 10% in order to account for the electricity price increases.

The Ministry of Finance has selected law firm Dechert LLP as legal consultant for the issue of USD 3 bn in sovereign bonds, Al Mal reports. Seven firms had pitched for the gig, according to Al Borsa, including Helmy, Hamza & Partners; Matouk Bassiouny; Zaki Hashem & Partners; and Sarie Eldin & Partners. As we had previously reported, Egypt was looking to borrow USD 3 bn through a eurobond issue to finance part of the three-year economic reform plan.

Renaissance Capital has initiated coverage of Cleopatra Hospital, naming the hospital group one of its two top healthcare picks in emerging / frontier markets. The EM-focused investment bank has a “buy” recommendation on the company and a target price of EGP 11.95 per share, writing: “As Egypt’s largest private healthcare provider, we believe it is well positioned to capture the country’s structural top-down growth in an environment of low (but accelerating) insurance penetration, high disease prevalence and poor standard of care.” CLHO trades at a 55% discount to its emerging and frontier peers on 2017E P/E. Rencap says Cleopatra has “embarked on a short-term Marshall Plan to uplift and streamline the standard of services group-wide. While we expect variability in profitability to remain among its four hospitals owing to differences in case mix, we expect the group’s large scale will solidify its position vs competitors, insurance providers and suppliers.” In short, it says, Cleopatra is “One of the best Egypt plays.”

Appliances retailer B-Tech is preparing to increase its issued capital to EGP 400 mn from EGP 88 mn, Chairman Mahmoud Khattab told Al Mal. UK private equity group Development Partners International (DPI) had acquired a third of B-Tech’s shares for USD 35 mn in July. Khattab said there’s no point to listing on the EGX at the moment, but B-Tech will focus on expanding into Upper Egypt as it looks to grow its branch network. The aim is to have a 12-15% market share and expand to 102 branches by 2020, from 67 currently, while also looking at international expansion, potentially through franchising. Khattab says B-Tech expects to record sales of EGP 2.2 bn in 2016, up from EGP 1.6 bn last year.

BPE JV with Japan’s Daikin: Japanese multinational AC manufacturing company Daikin Industries formed a Cairo-based joint venture with BPE Partners (formerly Beltone Private Equity) called Daikin Egypt which is set to launch this month, Al Shorouk reported. Daily News Egypt puts the investment value at EGP 47 mn. Daikin Egypt will distribute and provide after-sales services for ACs, heating, ventilation, and cooling energy-saving equipment.

The Investment Ministry has reportedly commissioned JWT and Hill+Knowlton to promote national projects and the planned listing of state-owned companies, Al Mal reported. The two companies are set to begin a marketing campaign in September, starting from the GCC then Europe. Investment Minister Dalia Khorshid added that there is a chance that a third partner would be need to help with the marketing campaign. Separately, Khorshid said that amendments to the Investment Law, aimed at improving the ease of doing business, are set to be completed by next month.

And the International Award for Outstanding Excellence in the Field of Parliamentary Dumbassery Goes To… The House’s ICT committee wants to draft a law that would set a taxation framework in Egypt for ride-hailing apps such as Careem and Uber. As we noted last week, Uber does not pay taxes in Egypt due to an international treaty on avoiding double taxation in place between Egypt and the Netherlands. And you know what? The House may have a point there, frankly: Companies rendering services in Egypt using Egyptians driving Egypt-registered cars should — morally, at least — be subject to tax in Egypt.

Then (and with apologies to Mr. Shakespeare): Cry ‘Havoc!’ and let slip the dogs of dumbassery. The rare display of parliamentary intelligence ends there. The committee also wants to tell Uber and Careem how to run their businesses, Al Mal reports, quoting a committee member as saying surge pricing should be scrapped, while the fee charged to users who cancel a ride request is “illegal.” It doesn’t end there: The committee also recommended that Uber and Careem find a way of incorporating taxi drivers into their companies on the grounds that it’s illegal to provide livery services with private cars. (That may be true, but what’s next? Will the committee take off the streets the tens of 1000s of unlicensed gypsy cabs — or “collective service taxis” — that serve low-income earners?)

Uber’s representative reminded the committee that drivers pay income tax in Egypt (lame, at best) and said surge pricing exists to get more drivers on the road at peak times (entirely Uber’s business).

MOVES- Kareem Fahim (Twitter) was appointed Istanbul Bureau Chief for the Washington Post, the newspaper said in a statement. Fahim covered the Middle East for the New York Times based out of Cairo since 2011.

Positioning the move as being part of the reform process, the Ismail cabinet approved the draft Settlement of Taxation Disputes Act at its meeting yesterday. Finance Minister Amr El Garhy told Al Masry Al Youm that the bill is meant to address over 150k disputes worth a combined EGP 48 bn that are currently before the Administrative Judiciary and the Tax Authority. The draft law will be sent to the State Council (Maglis El Dowla) for revision, he added. Cabinet also reinstituted a ban on rice exports as it gears up for domestic harvest season. It set the buying price at EGP 2,300 per tonne of domestically harvested thin-grain rice, and EGP 2,400 for a tonne of wide-grain rice. The government is looking to buy 2 mn tonnes of domestically harvested rice. Within the last 12 months, the government has now banned rice exports, rescinded its ban, and imposed it a second time. We continue to maintain that we have no business growing as water-intensive a crop as rice — and that exporting it is tantamount to exporting water. Other decisions taken by the cabinet include:

• Approved a plan to connect 2.4 mn homes with natural gas between January 2016 and June 2018. Cabinet had previously voted to add 1 mn homes to the grid in FY 2016/17;
• Approved five oil and gas E&P projects (see below);
• Tasked the Arab Contractors with completing the second phase of an international cycling track project;
• Approved the addition of three segments to the social housing program.

Egypt has approved five oil and gas drilling and exploration agreements with IOCs, Oil Minister Tarek El Molla said, Reuters reported. Four of the agreements were for offshore Mediterranean concessions between EGAS and BP, Eni, Total, and Edison separately. The fifth was signed between EGPC and Trident Petroleum for an oil drilling agreement in the Gulf of Suez.

** Earnings watch: Among the companies reporting earnings yesterday:

• Gold miner Centamin upped its production guidance for 2016, claiming its 2Q2016 core profit has doubled, Reuters reported. The company is expecting to produce between 520k – 540k ounces of gold this year, up from 470k ounces last year.
• NBK Egypt said net profit rose to EGP 407 mn in 1H16 from c EGP 284 mn in the same period last year, according to an EGX statement.
• SAIB reported a bottom line of USD 31 mn, up from USD 20 mn recorded in 1H15, according to a bourse statement.
• Talaat Moustafa Group’s 1H16 net profit rose to EGP 434 mn in 1H2016 from EGP 394 mn on revenues of EGP 2.9 bn, the company said in a regulatory filing..

Leadership turmoil at the World Bank? World Bank boss Jim Yong Kim would like a second term, but the bank’s staff association has taken the “unusual step of sending a letter to the executive directors in August — normally vacation season for bank staff — in an effort to ensure their concerns are included in whatever process may be underway,” industry publication Devex reports. The story has crossed into the mainstream press, with the Financial Times writing that Kim “has spent the past few months quietly campaigning for a second term as president,” adding that the staff association wants an international search for a replacement. The association, the FT says, warned of a “crisis of leadership” and demanded that the bank engage someone as president who isn’t an “American male.”

It’s a mixed bag of treats this morning for Egypt in the international media: To the extent that Egyptian news is noticed, most people will pick up on wire coverage of Egypt returning to the podium at the Olympics with two victories in weightlifting, including the first-ever Olympic medal for an Egyptian woman, 18 year-old Ismalia native Sara Ahmed. Your foreign counterpart or seatmate on that flight to JFK? They’re more likely to have read the Associated Press’s piece noting “Egypt House Speaker Wants Illegal Currency Dealers Executed” (not generally seen as a temperate or appropriate sentiment, Mr. Speaker). It doesn’t get much better from there:

The New York Times sheds light on what it says is a police crackdown on LGBTQ Egyptians that has seen at least 250 arrests since 2013. The piece by acting Cairo correspondent Liam Stack quotes Scott Long, a -prominent human rights activist previously based in Egypt, as saying that the crackdown came because “somebody in the Ministry of Interior realized this was a good way to get good publicity for the police.” The report alleges police are using stings and coercive force map out networks of LGBTQ acquaintances by spoofing them online or accessing their mobile phones to “search their data to find others.”

Egypt is becoming a popular launching point for migrants looking for routes to Europe as Balkan states close their borders and EU countries ramp up security measures in the Mediterranean, Russian state-owned news outlet Sputnik reports. "The number of migrants coming to Egypt over the southern border with Sudan has increased recently," said Egyptian Initiative for Personal Rights researcher Mohamed al-Kashef. The influx of migrants is affected by the EU-Turkey migration agreement. "Instead of the closed roads across the sea to Greece or the Balkans, the fleeing Syrians may switch to Egypt via Sudan," he added.

Leftist Al Shorouk columnist Abdullah El Sennawy discusses the impact of The Economist article on the IMF loan. He argues that since obtaining the loan in itself is a vote of confidence in Egypt’s ability to earn foreign investment, the magazine’s wide circulation could hurt investment opportunities in Egypt at a time when it needs them the most. The coverage could also push the IMF to impose harsher conditions that don’t take into account their possible social implications. Meanwhile, Al Shorouk Editor-in-Chief Emad ElDin Hussein says people should “doubt themselves repeatedly” before accusing The Economist of purposefully defaming Egypt in the same vein as partisan publications from Qatar and Turkey.

Government-aligned Al Ahram columnist Makram Mohamed Ahmed writes on Egypt’s previous attempts to obtain an IMF loan, criticizing the IMF’s “regurgitated” reform program and the insistence that the program’s reform agenda is homegrown.

An economics columnist for Al Masry Al Youm who writes under the pseudonym Newton pens a piece detailing the importance of Egypt declaring its economic identity. Egypt has an ambitious 2030 plan, but “When does it begin?” he asks. Ultimately, investors want security, he says, and they need to be able to enter and exit the country safely.

Political science professor at Cairo University Moataz Abdel Fattah asks if President Abdel Fattah El Sisi cares more about developing buildings than developing humans in a piece for El Watan. He discusses the disparity between El Sisi’s public policy statements, likening them to a father who — metaphorically — builds factories, companies and restaurants for his kids, but doesn’t pay much attention to their education.

Writing for state mouthpiece Al Ahram, journalist Farouk Goweda highlights a lack of censorship by the General Directorate for the Censorship of Artistic Works during the month of Ramadan. He blames the “art” business for the “disaster” that is ruining Egypt’s youth with [redacted], violence and [illicit substances].

As Egy Stats put it: “When you just can’t wait to get your hands on your first Olympic medal” (View .gif of Egyptian weightlifter Mahmoud Mohamed going for his bronze)

International cooperation minister Sahar Nasr discussed the possibility of Japanese funding for new development projects in electricity, irrigation, housing and higher education at a meeting with representatives of the Japan International Cooperation Agency (JICA) and Japan External Trade Organization (JETRO), Al Mal reported.

The Electricity Ministry is relying on domestically produced prepaid meters “for the coming period” to avoid sourcing FX and encouraging production, Electricity Minister Mohamed Shaker told Al Mal. The ministry has requested manufacturers to increase their production to meet the ministry’s target of installing 40 mn meters over 10 years at a rate of 4 mn per year, he added. The ministry has already installed 2 mn meters sourced from suppliers including El Sewedy Electrometer, Global Tronics, and the Arab Organization for Industrialization, said Shaker.

This doesn’t mesh with what we’re heading from industry, but: EGAS has reportedly stopped supplying MOPCO, Alexfert, and ECHEM with gas since 3 August, Al Borsa reports. While move was ostensibly taken so that the companies can “undergo routine maintenance,” and EGAS source implies that the 135 mcf of gas that supposed to go to them has been redirected to power plants. Gas supplies will be halted for 15-20 days, said the source, adding that Helwan Fertilizers Company will also “carry out routine maintenance” during the second half of this month.

The Suez Canal Economic Zone (SCZone) urged CBE governor Tarek Amer to make companies pay electricity and water utilities bills in USD to recoup the FX necessary to pay back loans that are financing the build-out of its water and power plants, Authority head Ahmed Darwish said on Mehwar TV’s “90 Minutes”. In a bid to lure in investors, Darwish said there would be no limits on USD transactions as it is a free zone. The former minister added that construction of piers at East Port Said Port will be completed around January or February. The port’s cranes will be built in a year and a half with the port set to be fully operational in 2018, Darwish said. The Zone’s piers are being constructed by five companies including Arab Contractors, Orascom, Hassan Allam, Qassed Karim and Petrojet. You can watch the full interview in Arabic (runtime: 1:16:32; with Darwish’s segment starting at 26:50)

The Housing Ministry has launched the EGP 530 mn second phase of the Six of October wastewater treatment plant and issued an EGP 700 mn tender for electromechanical work, Al Masry Al Youm reported. The second phase will begin operations in 2018 and will serve an expanding population in Western Cairo, said Housing Minister Moustafa Madbouly. The first phase began operations last February at a total cost of EGP 2.7 bn, said an official at the Six October City Authority.

The Construction and Design Company (Constec) has signed a partnership agreement with Spain’s Abengoa to build a water desalination plant in Gabal El Galala, Constec Managing Director Talaat Fawzy told Amwal Al Ghad. The company expects to sign the final agreements and begin construction within four months, he added. Constec is looking to looking to execute the civil engineering and electromechanical works, said Fawzy.

Road projects worth EGP 600 mn will be implemented next year, said the head of Cairo’s roads department Ashraf Helmy told Amwal Al Ghad. A number of roads are being built now to link Cairo to new cities, with investments over EGP 50 mn, which will be completed in the next three months.

Microsoft is set to complete the national electronic commodity trading system connecting the Food Industries Holding Company with the General Company for Wholesale Trade and the consumer complexes, Supply Minister Khaled Hanafy told Amwal Al Ghad. The system is meant to increase efficiency in handling, storage, and trading of commodities between suppliers, producers, and retailers.

Indian automobile manufacturer Mahindra & Mahindra is may be looking for an Egyptian partner with whom to build a farm equipment assembly plant with investments of USD 40 mn, Trade and Industry Minister Tarek Kabil told Al Borsa. The company is also studying opening a rep office in Egypt.

Turkish Airlines will resume flights to Sharm El Sheikh on 10 September following a 10-month suspension, the airline told Ahram Online. The airline will operate four weekly flights between Istanbul and Sharm El Sheikh. Flights from Istanbul to the resort town were suspended in November 2015 following the Metrojet flight crash.

The Ministry of Defense selected UK-based Smiths Detection, the security equipment subsidiary of Smiths Group, for Falcon to purchase an estimated GBP 19 mn in passenger screening equipment, according to a statement on Wednesday. The equipment includes x-ray scanners, passenger screening systems and trace detectors. The equipment can reportedly “automatically detect explosives in carry-on baggage… detect threat items of any material under clothing,” and detect and identify “explosives from traces found on baggage or clothing,” according to the statement.

Just when you thought sexism couldn’t get any worse: Egyptian Radio and Television Union head Safaa El Hegazy has reportedly suspended eight female television anchors on three state-owned stations due to “concerns regarding [their] appearance.” El Hegazy (who was once suspended herself due to a decree removing “overweight” news anchors) told Al Mal that anchors who fail to stick to “an appropriate diet” and don “appropriate clothing” will be transferred to administrative functions. She forgot to mention her criteria for evaluating the right-swipe-worthiness of male anchors.