Sunday, 28 August 2016

VAT debate kicks off today in the House, Ismail says no cabinet shuffle coming


What We’re Tracking Today

There is expectation of a cabinet shuffle this week after the resignation on Thursday of Supply Minister Khaled Hanafy just days before the start of a parliamentary inquiry into whether state funds were used to purchase domestic wheat that did not exist.

The House of Representatives is expected to begin discussions on the value-added tax (VAT) today. The Parliament will hold three sessions to discuss the bill before voting on it, according to Deputy Finance Minister Amr El Monayer. We have more on this front in Speed Round.

Elections for the board of the Federation of Egyptian Industries are set to take place today, Al-Ahram reports.

What We’re Tracking This Week

On Monday, the House of Representatives will discuss the fact-finding report on allegations of corruption in the domestic wheat-buying program.

Also tomorrow, the latest Russian delegation is reportedly due to arrive to probe airport security ahead of a possible lifting of the ban on flights to Egypt. We have more in Speed Round on both topics.

Feed-in tariff news coming this week? Electricity Minister Mohamed Shaker is reportedly due to hold a press conference this week to discuss the embattled program.

On The Horizon

Oil Minister Tarek El Molla’s trip to Cyprus, originally scheduled for last Thursday, has been postponed to this week. “El Molla was expected in Nicosia on Thursday for talks with Cypriot officials and the signing of three bilateral agreements concerning the export of natural gas.” According to Interfax Global Energy, El Molla will sign a bilateral agreement for the sale of Cypriot gas to Egypt during the trip. Mohamed El Masry head of EGAS reportedly told Al Borsa that Egypt plans to import 700 mcf from the Aphrodite field by 2020.

President Abdel Fattah El Sisi is in India on Thursday and in China on 4-5 September. El Sisi will be attending the G20 summit in Beijing along with other world leaders.

Egypt releases its playlist — catch the vibe: Following news that Michael Bolton is coming to Egypt in October, we are not kidding when we say that there is word that ABBA is also making their way here. Well, at least two of the four original members, who are set to perform on 15 September at Stella Di Mare Ain Sokhna. The advertisement by Travel Choice Egypt says it all: “Do you love music? Do you remember Mama Mia & Voulez Vous? Sure [sic] your answer is yes. Even if… [you’ve] never heard these songs we’ll… make you enjoy it,” the flyer reads. Unconfirmed to be performing in Egypt this summer as of yet: Bonnie Tyler, 4 Non Blondes and Natalie Imbruglia.

Speed Round

Speed Round is presented in association with

Supply Minister Khaled Hanafy is out: Supply Minister Khaled Hanafy submitted his resignation from government, announcing at a press conference on Thursday (runtime 02:41). “Holding public office is not a luxury … but a burden,” Hanafy said, reading out a prepared statement. Hanafy resigned after a cabinet meeting on Thursday which, according to Al Masry Al Youm, involved a heated exchange between Hanafy and Trade and Industry Ministry Tarek Kabil. Hanafy reportedly attacked Kabil, saying the General Organization for Export and Import Control, which is under Kabil’s authority, is the entity responsible for approving wheat shipments.

The resignation came barely four days before the House of Representatives is due to begin hearings on a report it commissioned into allegations that mns in state funding was used to purchase wheat that did not exist in this year’s domestic harvest.

Hanafy’s resignation seemed inevitable on Thursday morning with an Al Masry Al Youm report from 10am CLT suggesting he was going to resign at the cabinet meeting scheduled later that day. Al Mal suggests Hanafy was “forced” to submit his resignation during the meeting, at which he reportedly submitted documents proving his innocence from any wrongdoing regarding the wheat corruption investigation and the issue of his hotel accommodation. Reuters’ team in Cairo prepared a timeline of how events surrounding the wheat corruption investigation unfolded over the past two years.

The House of Representatives report on the issue accuses Hanafy of both mismanagement and misrepresenting facts about the success of the bread subsidies system, but does not make any direct criminal accusations. The report accuses him of presiding over a ministry which allows the mixing of imported wheat and domestically harvested crops, something which Hanafy has vehemently denied in the past. The report also alleges that Hanafy’s policies increased the state’s subsidy bill to EGP 40 bn in FY 2014-15 from EGP 35 bn in FY 2013-14 despite claiming to have cut the state’s subsidies 30%. The report’s final tally on the 2016 harvest: 200K tonnes of wheat worth EGP 560 mn at nine silos and shounas inspected remains unaccounted for. Al Borsa has published a copy of the 575-page report (pdf) which will be discussed tomorrow by the House.

Hanafy could face a criminal probe, a reportedly “informed government source” told Al Masry Al Youm, without providing further details.

Meanwhile, Agriculture Minister Essam Fayed is placing the blame for the wheat corruption scandal entirely on Hanafy, according to Al Mal. Fayed says the agriculture ministry’s role is solely that of production, monitoring, and research whereas Hanafy headed the committee responsible for receipt of wheat from farmers. The supply and agriculture ministries had both released antagonistic and conflicting statements concerning this year’s harvest, as we previously reported.

There’s no cabinet shuffle in the offing, said Prime Minister Sherif Ismail on Saturday, according to Al Masry Al Youm. The PM was denying rumors in the same newspaper claiming as many as six ministers would exit government service. Reuters cited “one government and one presidency source” as saying a cabinet shuffle was imminent after Hanafy’s resignation, also saying that as many as six ministers would exit. Al Mal reported that three to six would leave, naming the religious endowments minister as being among those expecting the axe.

Trade and Industry Minister Tarek Kabil will run supply portfolio until a new minister is appointed, Al Borsa reports. Kabil will have to hold down the fort for at least two weeks, according to remarks by Prime Minister Sherif Ismail picked up by AMAY. Al Borsa says Mamdouh Abdel Fattah, deputy Chairman of GASC, is being vetted for the position, while Al Mal claims five others are in the running, including current Military Production Minister Mohamed El Assar, Internal Trade Development Authority chief Ahlam Roshdy, Consumer Protection Agency boss Atef Yacoub.

Governorate shakeup coming: A shakeup of governors is coming before the end of the month, said Local Development Minister Zaki Badr, according to Al Borsa. Less than ten governors will be replaced, the minister added.

International schools, pharma products (both locally manufactured and imported), recycling, and handicap-enabled vehicles will all be exempt from the value-added tax (VAT), Deputy Finance Minister Amr El Monayer tells Al Mal. In a separate panel discussion hosted by Al Shorouk on the VAT, El Monayer said 57 goods and services will be VAT-exempt, while state-owned Al Ahram quotes the Finance Ministry as saying that the list holds 56 items. El Monayer confirmed that the legislation will increase taxes on cigarettes and alcohol.

Healthcare services could be VAT-exempt, with exception of private practitioners’ fees: Deputy chair of the Planning and Budget Committee Yasser Omar says the committee recommended exemptions for all healthcare services with the exception of private practices, saying it would be unfair to exclude doctors from the VAT. He added that the committee also recommended 32-inch televisions and refrigerators under 16 feet will be exempt from the VAT. El Monayer noted that the full list of exemptions will only be published after the legislation is approved by Parliament.

Al Ahram published a detailed brief on VAT after midnight including taxation of imports under the VAT, accounting procedures under the law, and how the tax would be applied on commissions and installment payments. We’re digesting it and will have more tomorrow. The brief and El Monayer’s press statements come as part of a media blitz by the Finance Ministry over the weekend revealing some of the essential elements of the Law in the run up to the House of Representatives opening debate today on the bill that will create the tax. The House’s debate will run for at least three separate sessions according to El Monayer.

The House looks likely to debate the VAT rate, not the necessity of the law: The dominant Support of Egypt coalition has announced it approves the law in principle, while the Free Egyptians Party, Al Wafd Party, the Egyptian Democratic Party, and the Nation’s Protectors Party have all said that they disapprove of the 14% baseline rate being pushed by the Ismail government. Some parties are pushing for a rate as low as 11%, AMAY reports.

Two “major” companies have been colluding in the superphosphate fertilizer market, the Egyptian Competition Authority (ECA) announced in a statement on Thursday, flagging four different violations. The ECA did not name the companies charged, but said it obtained proof that the two companies have colluded to fix selling prices domestically and also limited distribution nationwide to preserve their respective market shares. This prevented production-driven price decreases from reaching the consumer, the ECA alleges. ECA chief Mona El Garf told Al Mal that the two companies will be given 15 days to reach a settlement or be referred to the Prosecutor General’s Office for further investigation and potential charges. The two companies are allegedly Kafr El Zayat Pesticides and Abu Zaabal Company for Fertilizers, according to a later piece published in Al Mal.

Four cement distribution companies are also facing charges of engaging in anti-competitive practices, the newspaper alleges. Separately, the ECA has referred the Misr Qena Cement Company to prosecution for allegedly failing to notify it of its acquisition of ASEC Minya Cement and ASEC Ready Mix, Al Ahram reported.

EFG Hermes is moving into Pakistan. Wholly-owned subsidiary EFG Hermes Frontier Holding has entered into a sale and purchase agreement to acquire a majority stake in Pakistan’s Invest and Finance Securities Limited (IFS), the firm announced in a regulatory filing on Thursday. The transaction is worth about PKR 153.12 mn (c. USD 1.46 mn). Subject to regulatory approval, EFG Hermes Frontier Holding LLC will submit a tender offer for IFSL shares, in accordance with Pakistan Stock Exchange regulations. EFG Hermes said in June that its roadmap following the sale of most of its stake in Lebanon’s Crédit Libanais would include transformation into a frontier house. We had reported back in March that Bank Alfalah was advising EFG Hermes on the sale. IFS Chairman and CEO Muzammil Aslam said at the time that “Global investment banks have done business in Pakistan’s equity market, but EFG will be the first one to actually have its own skin in the game as a majority shareholder of a local brokerage house.” Aslam led a group in the acquisition of 78% of IFS in November 2015; 22% of the company’s shares are in free float on the PSX. IFS’s website says the firm offers “financial brokerage, corporate finance and financial research” and has offices in Karachi and Lahore.

“Sharm El Sheikh Edges Back Into the Tourism Picture” –WSJ. The Wall Street Journal uses budget airline Germania’s decision to resume flights on 31 October — one year to the day from the downing of Metrojet flight 9268 over the Sinai — to argue that “Tourism from Europe to Egypt is poised to gain pace again more.” The story notes that Moscow is edging toward allowing flights to Egypt to resume, and quoted a UK government spokesman as saying the British are “continuing to work with the Egyptian authorities to address safety issues with the goal of resuming service ‘as soon as possible.’”

Speaking of Russia resuming flights: A delegation of Russian aviation specialists is expected to arrive tomorrow to test airport security, according to an unnamed source in Russia’s aviation authority, Russian state news agency TASS reported. The Egyptian government is also reportedly ready to dedicate airport terminals to Russian arrivals, an Egyptian embassy official in Moscow told Rossiya 24 television on Friday, TASS reported. Russian officials have yet to confirm they intend to lift the ban, Tourism Minister Yehia Rashed told Al Shorouk, optimistically adding he is “confident” that Egypt could climb back up to 10 mn tourist arrivals per year by the end of 2017. Some 14.7 mn tourists visited Egypt in 2010, the peak year for the industry.

The controversy we reported on Thursday surrounding Welspun, a major Indian supplier to US retailers, mislabeling textile products as made of “Egyptian cotton” is bad news for Egypt, Reuters suggests. The incident could leave retailers “wary of dealing with products labeled Egyptian cotton, potentially providing a boon to growers of U.S. Pima cotton in places like California and Arizona.” This exacerbates an already tough time for growers of long-staple Egyptian cotton as farmers here are set to produce 160,000 or so 480 lb. bales of cotton in 2016-17, down from 1.4mn bales in 2004-05, accounting for just 0.2% of global output. The production figures themselves suggest corruption, Jordan Lea, CEO of a cotton trading company, says, noting “some products marketed as containing Egyptian cotton almost certainly do not, or are blended with other types of cotton without proper disclosure.” Lea adds “If you look at the volume of Egyptian goods that are for sale, and you look at the volume of Egyptian cotton that’s produced, it would lead one to scratch one’s head.”

Did Egyptian strawberries cause Hep A outbreak in Virginia? The Ministry of Agriculture is investigating claims that strawberries exported from Egypt are responsible for an outbreak of Hepatitis A in the United States that has so far reached 28 cases as of Thursday and has prompted a class-action lawsuit against the food chain that sold drinks made from the strawberries. Following a number of media reports from the United States regarding the outbreak, including a video apology from the CEO of Tropical Smoothie Cafe (0:55) assuring customers that strawberries are now sourced from Mexico and California, the Ministry of Agriculture began its own investigation, according to ministry spokesperson Edi Hawash, Food Safety News reported. However, the ministry stressed that as of last week, it had yet to receive any official request from any US government agency, and the random samples it has taken have yet to uncover any indication of the virus. US health officials are warning that anyone who consumed any food or drink at the smoothie franchise in Gainesville, Virginia between 28 July and 18 August may have been infected. According to a statement from the Virginia Department of Health dated 19 August, “genetic testing shows the illnesses were caused by a strain of hepatitis A that has been associated with past outbreaks due to frozen strawberries from Egypt.” Egypt exports 40 mn tonnes of fresh and frozen strawberries per year.

Separately, the domestic press reports that Egypt could harvest 800,000 qintars worth of cotton this year. Agriculture Minister inaugurated the new harvest season in Beni Suef yesterday. One qintar of cotton is about 160 kg.

Correction: In the original run of this story, we repeated Food Safety News’ erroneous claim that Egypt exports 40 mn tonnes of strawberries per year. According to the most recently available data from the Food and Agriculture Organization of the United Nations, Egypt produced 422k tonnes of strawberries in 2013. We regret the error. H/t Mohamed M.

Telecom Egypt is phasing out the TE Data brand name as it prepares to acquire a 4G licenses, Al Shorouk reported. The company will provide ADSL and other internet services under the Telecom Egypt brand name.

The EGP slightly weakened on the parallel market on Thursday, with greenbacks c changing hands at EGP 12.70 per USD,Al Mal reports, despite being largely stable at EGP 12.60 since the announcement of a staff-level agreement with the IMF on a bailout facility. Reuters had recorded a parallel market rate in the EGP 12.50-12.65 band ≥on Wednesday.

CORRECTION- In our Thursday issue, we incorrectly stated that “Father Andre Zaki, head of the Anglican Church in Egypt” had issued a statement on the draft law on church construction. Andrea Zaki’s correct title is Reverend Doctor, not Father, and he is the head of the Evangelical, not Anglican, Church in Egypt. The Anglican Church’s Egyptian branch is under the spiritual authority of the Archbishop of Canterbury and its current bishop in Egypt is Bishop Most Rev. Dr. Mouneer Anas. H/t Jay R.

The Macro Picture

Emerging markets can expect some turbulence next month after US Fed chair Janet Yellen left the door open for a rate hike as early as 21 September. In closely watched remarks at the Fed’s annual Jackson Hole monetary policy conference, Yellen said “a lot of new jobs were being created and economic growth would likely continue at a moderate pace. ‘I believe the case for an increase in the federal funds rate has strengthened in recent months,’ she said.” US shares headed lower on Yellen’s remarks, while the USD surged in Friday trading, Reuters noted. An interesting analysis piece from Reuters suggested Yellen has no intention of trying out negative rates or helicopter money, although the WSJ (paywall) says she noted that additional quantitative easing is on the table. CNBC, the Financial Times and all have solid coverage, depending on your preferences this morning.

More doom and gloom for you to start the workweek: US economic growth was revised downward to 1.1% in the second quarter, “underscoring a weak performance in the first half of 2016,” the Financial Times (paywall) reports. This comes as the salmon-colored paper warns that “the rally in emerging markets masks frailties,” warning that “investors should be wary of Chinese debt lurking in a jumble of assets.”

Wait, it gets worse: Index funds are “eating the world,” the Wall Street Journal warns. It’s a nicely alarmist headline picks up on a research report headlined “The Silent Road to Serfdom: Why Passive Investing Is Worse than Marxism” — and the fact that in the past year, USD 310 mn in capital has fled actively managed portfolios, and USD 409 bn has flowed into index funds — to argue that “autopilot portfolios could become so popular that they distort the financial markets.” The research note that kicked off the discussion is getting plenty of ink — everywhere from CNBC and Barron’s to Bloomberg and (wait for it) Reddit.

Egypt in the News

Driving the conversation about Egypt in the international press this morning is driven largely by wire coverage, including Ahmed Moussa abandoning Twitter after the flop of his poll on whether the president should seek a second term; the execution by Daesh of a police driver in Sinai (with images of the murder posted in Twitter); and Reuters’ look at what the Welspun “Egyptian cotton” scandal means for the industry.

Our favourite story about Egypt this morning is really about New York: The New York Times reviews Gyro96, a popular micro-storefront eatery on East 96th St. in East Harlem run by Mansoura’s Waled Haredy. The 85 square foot shop is wedged between a brow salon and a smartphone dealer, the piece tells us. Read “Two New Stops for Middle Eastern Food: Dizengoff and Gyro96,” including six images in a photo gallery just on Gyro96.

The “economic crisis” is hitting Egypt so bad, it “cannot afford to keep its museums open let alone search for ancient buried treasures,” Antiquities Minister Khaled El Enani told Reuters in an interview. He says the state has had to close 20 museums down nationwide since 2011 because there were not enough resources to run them. “Without a revival in tourism none of his new projects, such as the introduction of year-long museums and heritage site passes or extending opening hours will have the desired effect.” El Enani adds. One exception to this is the planned partial opening of the Grand Egyptian Museum, the construction of which was financed by a loan from Japan. Separately, the Minister said he has no plans to open up King Tutankhamun’s tomb in search of the lost burial site of Queen Nefertiti. “The most minor of incisions in the wall could wreak damage to an inner chamber that may have been hermetically sealed for so many years,” Reuters notes and El Enani says the radar scans did not show 100% proof that there were empty spaces” behind the tomb.

Politicians and media figures in Egypt are calling on the government to grant asylum to Turkish dissident Fethullah Gulen if the US agrees to extradite him to Turkey, Amr Eltohamy writes for Al-Monitor.

A court ordered the release of rights lawyer Malek Adly, who was detained after objecting to President Abdel Fattah El Sisi’s decision to “hand over two Red Sea islands to Saudi Arabia during a televised interview, Associated Press reported. The latest ruling rejected an appeal by the prosecutor objecting to Adly’s release, Adly had been detained without charge in solitary confinement for over 100 days. However, AMAY reports he has yet to be actually released.

Worth Reading

Why 4 a.m. Is the Most Productive Hour: From the Wall Street Journal: “Most people who wake up at 4 a.m. do it because they have to—farmers, flight attendants, currency traders and postal workers. Others rise before dawn because they want to.” Not up for rising before the sun? Learn from this: “One of the most common challenges to productivity, Dr. Davis says, is that people booby trap their offices with distractions: Desk clutter, email pop-ups, cellphone, Facebook, news feeds. “By waking up at 4am, they’ve essentially wiped a lot of those distractions off their plate. No one is expecting you to email or answer the phone at 4am. No one will be posting on Facebook. You’ve removed the internal temptation and the external temptation.” If you’re not a journal subscriber, you canread the piece at the Australian without a pay wall, though the WSJ’s clip art is vastly better.

Worth Watching

By some estimates, we’re as few as 11 days away from Apple’s fall launch event, which will definitely bring a new iPhone, is unlikely to deliver a new iPad Pro, and which (pray God) will bring an updated MacBook Pro. Kill time while you wait by going on a tour of “40 Years of Apple With Walt Mossberg,” released a few months back for the company’s 40th anniversary.

Diplomacy + Foreign Trade

The family of the young Egyptian boy, who crossed the Mediterranean on his own seeking medical help for his brother, will join him in Italy, the Foreign Affairs Ministry said. “Thursday’s remarks by ministry’s spokesman, Ahmed Abu-Zeid, are Egypt’s first confirmation of the teen’s dangerous sea crossing,” The AP reported.

International Cooperation Minister Sahar Nasr met with a delegation from the World Bank that also included representatives from the French Development Agency (AFD) and the EU to discuss a project to connect natural gas to 2.4 mn homes, read a statement from the ministry. Nasr pushed to increase the governorates covered by the project to 20 instead of 11, to include more from Upper Egypt. The World Bank is contributing USD 500 mn to the project, the AFD is contributing EUR 70 mn, while the EU offered a grant worth EUR 68 mn.

Meanwhile, Nasr will hold talks with the World Bank over the second USD 1 bn tranche of the USD 3 bn development loan signed last December during the IMF/World Bank fall meetings in October, government sources tell Al Borsa. The talks must be predicated on Parliament accepting the agreement, the source added.

Jordan, Egypt transport ministers meet: Transport Minister Galal Saeed and his Jordanian counterpart Yahia Kasabi have agreed to lower trade barriers between their countries, as well as electronically connect their customs authorities, Al Borsa reported on Saturday.

Egypt, Japan due to sign agreement today: The Sixth Tokyo International Conference on African Development (TICAD VI) Summit was held in Nairobi, Kenya over the weekend, Al-Ahram reports. Japanese Prime Minister Shinzō Abe said that his country will invest USD 30 bn in Africa during the upcoming three years, USD 10 bn of which will be invested in developing basic infrastructure, in collaboration with the African Development Bank. The Egyptian delegation is set to sign an MoU with the Japan External Trade Organization today.


EGAS targeting 6 bcf/d of natural gas by 2020

EGAS is targeting increasing its production from 4 bcf/d to 6 bcf/d of natural gas by 2020, according to a report picked up on by Al Mal.


Al Kharafi affiliate to build 77km long road in Egypt

Kuwait’s EMAC Contracting is set to build a 77km-long road as part of the national road network project announced by President Abdel Fattah El Sisi in 2014, Construction Week Online reported, citing Amwal Al Ghad. “The contractor, which is affiliated to Kuwait’s Al Kharafi & Sons Group, expects to develop the project within a year.”

Basic Materials + Commodities

GASC buys 180k tonnes of Russian wheat

The General Authority for Supply Commodities (GASC) bought 180k tonnes of Russian wheat in a tender on Friday, Aswat Masriya reported. The wheat was purchased at an average price of USD 185.5 per tonne including cost and freight, according to GASC deputy chairman Ahmed Youssef. Egypt had received seven offers on its tender.

Poultry feed producers ask CBE to provide access to FX as prices increase by more than 30%

The Egyptian Poultry Association (EPA) has asked officials from the CBE and the Finance Ministry to look into ways to provide FX to firms importing inputs used to produce feed for poultry, Al Borsa reported on Saturday, citing EPA member Tharwat El Zeiny. Feed prices have reportedly increased to EGP 4,900 per ton from EGP 3,500 over the past year as firms increasingly rely on the parallel market for FX.

Agriculture Ministry targets the production of 1.5 mn feddans of corn by 2017

The Agriculture Ministry is aiming to raise its production of corn by increasing the amount of land allocated to the crop to 1.5 mn feddans from 800k feddans by 2017, according to Agriculture Minister Essam Fayed, Al Mal reported on Saturday. The ministry is targeting an increase in the production of yellow corn in particular at the expense of white corn, as it can be provided as feed for the poultry industry, which has been heavily impacted by the FX shortage. The government reportedly has to import USD 3 bn worth of feed per year.


LG-Egypt in talks for a USD 8-10 mn in L/C funding

LG-Egypt is looking to secure USD 8-10 mn in letters of credit to resume production from its washers line in Tenth of Ramadan, Al Borsa reported. The company is currently in talks with two banks for the trade financing, with a source saying that Banque Misr is “the most cooperative” of all the banks LG-Egypt is in business with. The washer line has a capacity of 600k units annually.

Real Estate + Housing

Qatari Diar says armed men are now in control of the City Gate project

Qatari Diar is looking to exit its City Gate project in New Cairo because “armed men have been occupying the project’s site since 18 May,” the company said, in a follow up to the news we reported on Thursday. Do not try to visit the site, the company urged people who have bought units in the project in a message, as it cannot guarantee anyone’s safety there, Al Borsa reported. News reports have emerged that a prosecutor and an accompanying police officer were shot dead when visiting the site.

Automotive + Transportation

Cairo Metro ticket prices rise to EGP 2-4 range from EGP 1

Cairo Metro ticket prices should rise to the EGP 2-5 range by September. The first two cars of all trains will be upgraded to include air conditioning and will cost a minimum of EGP 3 to ride, Al Masry Al Youm reports. Tickets for the air-conditioned and non-air conditioned cars will be color-coded. Elsewhere, Al Mal cites a government source as saying the government is mulling raising ticket prices to EGP 4-5.

Railway ticket prices increase following three-day maintenance

Railway ticket prices for second-class seats on the air-conditioned train 906 rose to EGP 70 on 25 August, up from EGP 45 on 17 August following a three-day period maintenance, Egyptian National Railways (ENR) spokesperson Nagwa Albert told Al Mal.

Banking + Finance

Global Lease signs EGP 200 mn loan agreement with Arab African International Bank

Global Lease has landed EGP 200 mn from Arab African International Bank to finance leasing portfolio, Al Borsa reported on Saturday. The firm plans to use the loan to expand with an aim to double its market share, and is also currently in negotiations with four banks for a total of EGP 400 mn in funding. Global Lease is a joint venture between Wadi Degla Holding and Germany’s development bank KfW, the newspaper says.

Other Business News of Note

Billboard costs going up for advertisers, using LED lights instead

The increase in electricity prices is driving up the cost of outdoor advertising, Al Mal reports. Some companies are reporting a doubling of costs in some areas, spread between increases in licensing and electricity costs. Advertisers say the cost increase will drive down their margins, saying increasing their own fees is unlikely. One thing they are utilising is a shift towards using LEDs to backlight billboards. LED lights use only 12% of the energy used by conventional lights, one executive explained, adding that some companies are looking to expand the use of solar panels as well.

House Complaints Committee to work on bill to dissolve slush funds

The House of Representatives is set to hold a meeting on Monday to discuss the drafting of a bill to dissolve all so-called slush funds (special accounts) and transfer those funds to the state budget, Al Shorouk reported on Saturday, citing the committee’s head Hamam Al Adly. Last year, a year-long investigation by Africa Confidential in partnership with US-based NGO Angaza suggested there exists at least USD 9.4 bn in state funds placed in secret unaudited accounts at the CBE, in which senior officials spend from at their personal discretion. The committee has reportedly asked the Finance Ministry to prepare a report with estimates on the total value of these funds.

Legislation + Policy

Industry Ministry renews export fees on minerals to September 2017

Trade and Industry Minister Tarek Kabil issued a decree renewing the current export fees on copper, lead and steel through September 2017, Al Borsa reports. The fees do not apply for projects operating in free zones within GAFI-approved regulations.

Egypt Politics + Economics

Ahmed Moussa’s Twitter account lasts for one day on account of re-election poll

Television host Ahmed Moussa foray into Twitter lasted for all of one day, after the host’s channel Sada El Balad said the account was closed over claims of hacking, Mada Masr reported on Friday. After posting a poll asking users to vote on whether or not they would re-elect President Abdel Fattah El Sisi for a second that registered 80% of respondents voting no, the account was shut down. Sada El Balad alleges that the hackers are based in Turkey in Qatar, though their report did not specify what actions the hackers actually took — creating the account, creating the poll, or manipulating its results.

Court rejects suspending novelist Ahmed Naji’s prison sentence

A Cairo misdemeanor court rejected on Saturday a request to suspend the two-year prison sentence of novelist Ahmed Naji for “obscene” material from his novel “The Use of Life” that was printed in a literary magazine in 2014, Ahram Online reported. The case was brought against Naji by a “concerned citizen.”

National Security

Armed Forces kill four militants in gunbattle in Rafah, North Sinai

Egyptian Armed Forces killed four militants in an exchange of gunfire in Rafah, North Sinai, Aswat Masriya reported, citing a statement from the military. According to the statement, the militants were attempting to plant explosives in the area near a checkpoint before coming under fire from the military, who was later able to dismantle the IEDs.


Hossam El Badry named new coach for Ahly

Former Ahly coach Hossam El Badry has resumed his post for the third time, according to an announcement by Badry at a press conference on Saturday, Ahram Online reported. Badry replaces Dutch coach Martin Jol, who reported that he had received death threats over social media for Ahly’s unexpected elimination from the CAF Champions League.

On Your Way Out

The Damietta governorate has banned swimming in some beaches after a shark was found ashore on Thursday, Ahram Online reported. The shark, washed ashore, was dead, and belongs to a species that does not pose a threat to humans, according to a government official.

The Supreme Administrative Court accepted on Saturday a request to recuse the panel reviewing an appeal on the annulment of the maritime border demarcation between Egypt and Saudi Arabia and the resulting transfer of guardianship over the Red Sea islands of Sanafir and Tiran, Aswat Masriya reported. The panel “lacked the required impartiality” to consider the appeal, according to the Supreme Administrative Court’s ruling.

France’s Council of State’s ruled against the burkini ban in the small beachside commune of Villeneuve-Loubet on the grounds of violating civil liberties, but the town’s mayor insists that he will seek to enforce the ban, with others on France’s right such as former president Nicolas Sarkozy vowing to bring about a nationwide ban. BBC News notes that the burkini ban is front page news in France, and will likely become a key point of contention in upcoming elections, with Sarkozy seeking office once again.

The markets yesterday

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USD CBE auction (Tuesday, 23 Aug): 8.78 (unchanged since Wednesday, 16 March)
USD parallel market (Saturday, 27 Aug): 12.70 (sell) (up from 12.30 buy and 12.50 sell on Wednesday, 24 Aug, Fagr, Al Mal)

EGX30 (Thursday): 8,131.5 (-1.1%)
Turnover: EGP 419.6 mn (4% below the 90-day average)
EGX 30 year-to-date: +16.1%

Foreigners: Net Short | EGP -58.1 mn
Regional: Net Long | EGP +1.6 mn
Domestic: Net Long | EGP +56.5 mn

Retail: 58.8% of total trades | 63.5% of buyers | 54.1% of sellers
Institutions: 41.2% of total trades | 36.5% of buyers | 45.9% of sellers

Foreign: 23.0% of total | 16.0% of buyers | 29.9% of sellers
Regional: 3.6% of total | 3.9% of buyers | xx% of sellers
Domestic: 73.4% of total | 80.1% of buyers | xx% of sellers


Orascom Construction 2Q16: Stable earnings and profitability; Awards and net cash position a positive surprise; “Add” on FV of USD7.60

Strong backlog addition is the key positive highlight this quarter for Orascom Construction, where consolidated backlog grew 4.8% (USD2.2 billion) to USD 7.5 billion. Tap here to read the full research note, highlights of which include:

  • Awards; cash management and lower leverage are key positives
  • Healthy executions reflect on revenue; margins lifted by MENA region
  • Net cash position improved on debt reduction; CFO turns positive on WC management
  • No further losses expected from IFCo; Debt might increase towards year end
  • We recommend an “Add” on FV of USD7.60; Devaluation is your upside
  • Orascom Construction is a play on infrastructure spending and devaluation in Egypt
  • Our fundamental FV is c. USD7.60; Official exchange rate is your upside
  • Our assumptions are conservative on backlog and margin fronts
  • Stock is trading at discounted multiples compared to peers; Cash is 37% of market cap


WTI: USD 47.64 (+0.65%)
Brent: USD 49.92 (+0.50%)
Natural Gas (Nymex, futures prices) USD 2.87 MMBtu, (+0.88%, Sep 2016 contract)
Gold: USD 1,324.0 / troy ounce (-0.14%)

TASI: 5,976.9 (-0.9%) (YTD: -13.5%)
ADX: 4,519.8 (+0.2%) (YTD: +4.9%)
DFM: 3,492.2 (+0.3%) (YTD: +10.8%)
KSE Weighted Index: 348.4 (-0.2%) (YTD: -8.7%)
QE: 11,134.8 (-0.5%) (YTD: +6.8%)
MSM: 5,823.0 (-0.5%) (YTD: +7.7%)
BB: 1,146.4 (-0.6%) (YTD: -5.7%)

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28 August (Sunday): The House of Representatives is expected to vote on the value-added tax (TBC).

28 August (Sunday): The Federation of Egyptian Industries board elections.

29 August (Monday): The House of Representatives will discuss the fact-finding report on wheat purchases.

29-31 August (Monday-Wednesday): Egyptian-Jordanian Commission meeting

29-30 August (Monday-Tuesday): Wastewater Egypt conference.

01 September (Monday): President Abdel Fattah El Sisi is expected to be in India on a state visit en route to the G20 summit in China.

04 September (Sunday): Arab Trade & Supply Chain Finance Conference.

04-05 September (Sunday-Monday): President Abdel Fattah El Sisi is expected to be in China for a state visit coinciding with the G20 summit.

05-08 September (Monday-Thursday): The 6th EFG Hermes London MENA and Frontier Conference, Emirates Arsenal Stadium, London, UK.

05 September (Monday): Markit Emirates NBD PMIs out for Egypt, Saudi Arabia, UAE at 6:15am CLT.

06-08 September (Tuesday-Thursday): Citi’s 2016 Global Technologies Conference, New York.

11-13 September (Sunday-Tuesday): Eid El Adha (national holiday, tentative date).

14-16 September (Wednesday-Friday): Bank of America Merrill Lynch Global Healthcare Conference 2016, London, UK.

19-20 September (Monday-Tuesday): Euromoney Egypt conference, venue TBD.

19-20 September (Monday-Tuesday): Arqaam Capital MENA Investors Conference 2016, Park Hyatt Dubai, UAE.

19-21 September (Monday-Wednesday): Bank of America Merrill Lynch Global Consumer and Retail Conference 2016, London, UK.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

22 September (Thursday): Deadline for mobile network operators to accept the final terms for 4G mobile broadband network licenses.

27-29 September (Tuesday-Thursday): Citi’s Frontier Markets Symposium – London 2016, UK.

02 October (Sunday): Islamic New Year (national holiday, tentative date).

06 October (Thursday): Armed Forces Day (national holiday).

11 October (Tuesday): 2nd Annual Leasing Conference entitled “New insights to stimulate financing instruments”, Four Seasons Nile Plaza Hotel, Plaza Ballroom, Cairo.

11-12 October (Tuesday-Wednesday): Global Islamic Economy Summit, Madinat Jumeirah, Dubai.

26-27 October (Wednesday-Thursday): The Marketing Kingdom Cairo 2 event, Cairo.

November (TBD): Delegation of German companies in the renewable energy sector due to visit to discuss investment opportunities.

14-16 November (Monday-Wednesday): Bank of America Merrill Lynch MENA 2016 Conference, The Ritz Carlton, Dubai International Financial Centre, Dubai.

17 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

27 November (Sunday): 2016 Cairo ICT, Cairo International Convention Centre.

29-30 November (Tuesday-Wednesday): Citi’s Global Consumer Conference, London, UK.

04-06 December (Sunday-Tuesday): Solar-Tec exhibition, Cairo International Convention Centre.

04-06 December (Sunday-Tuesday): Electricx exhibition, Cairo International Convention Centre.

07-08 December: Citi’s 2016 Global Healthcare Conference, London, UK.

11 December (Sunday): Prophet Muhammad’s Birthday (national holiday; date to be confirmed).

11-13 December (Sunday-Tuesday): The Middle East Fire, Security & Safety Exhibition and Conference (MEFSEC), Cairo International Convention Centre, Cairo.

13 December (Tuesday): Amwal Al Ghad’s top 50 most influential women in Egypt women forum, Four Seasons Nile Plaza Hotel, Cairo.

29 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

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.