Sunday, 18 September 2016

A lot happened while we were on Eid break. Brace yourselves.

TL;DR

What We’re Tracking Today

…and we’re back: Welcome back to reality, ladies and gents. It was a shockingly news-filled Eid Al-Adha break. As you’ll read below in this morning’s edition: President Abdel Fattah El Sisi ratified the value-added tax, Amr El Garhy appears to have raised all of the funds we need to unlock the first tranche of the IMF funding (provided the executive board passes the agreement this month…), and the ergot flap hasn’t just cut us off from the global wheat market — it’s also cost Egyptian fruit and vegetable exporters their access to Russia. And that’s just for starters.

And as you’ll read in What We’re Tracking This Week, it doesn’t look like the newsflow is going to slow down this week. The first day of fall may not be until Thursday, but so far as we’re concerned, summer ended this past weekend.

Oh, and Thursday marked the eight-year anniversary of the collapse of Lehman and the start of the Great Recession.We marked the occasion by reading a meditation on its meaning from the Financial Times’ John Authers. We’re also re-reading Too Big To Fail to mark the occasion and confess to having watched The Big Short again this weekend after it hit Egyptian Netflix.

What We’re Tracking This Week

El Sisi to meet Sec. Clinton at UN: President Abdel Fattah El Sisi is among the world leaders that Democratic presidential hopeful Hillary Clinton plans to meet in New York this week. The Wall Street Journal and Reuters report that Clinton is “returning to her old stomping grounds next week, planning to meet with foreign leaders gathered for the United Nations General Assembly in New York City.” El Sisi will be in New York for the general assembly’s 71st session. For a detailed look at El Sisi’s policy agenda in New York, check out solid coverage in Ahram Online.

Conference season continues: The Euromoney Egypt conference gets underway tomorrow morning, with plenty of friends of Enterprise due on stage at some point during the two-day event. Euromoney is advertising that Cabinet members will be out in force, including Amr El Garhy and Sahar Nasr on Monday and Sherif Ismail, Tarek Kabil and Dalia Khorshid on Tuesday. Download the agenda here (pdf).

We also expect that a number of Enterprise readers will be presenting and asking questions at tomorrow’s Arqaam Capital MENA Investors Conference 2016 at the Park Hyatt Hotel in Dubai. At least 13 Egyptian issuers are due to attend, as is Deputy Finance Minister Ahmed Kouchouk. Interestingly enough, Iran is also making a play at Arqaam, with Mehrdad Sepahvand, a senior advisor to the Central Bank of Iran, set to give a keynote.

Also tomorrow: Bank of America Merrill Lynch will hold its Global Consumer and Retail Conference in London.

Egypt, Ethiopia, and Sudan’s irrigation ministers are set to sign contracts with French consultancy firms BRL and Artelia for impact studies on the Ethiopian Grand Renaissance Dam during their trilateral summit in Khartoum from Monday to Tuesday, Ahram Online reported citing MENA state news agency. The signing had originally been set for earlier this month, but was reportedly stalled by disputes over the wording of the contract and by Sudan not granting entry visas to officials from the consultancy firms.

Thursday looks set to be a busy day:

  • The Central Bank of Egypt will meet to review interest rates. It will do so just one day after the closely watched meeting of the US Federal Reserve’s Open Markets Committee, where there are fears a rate hike could sap some of the momentum from the EM equities rally we’ve seen since the end of the first quarter. A Reuters poll of more than 100 economists late last week found respondents suggesting there’s a 70% probability of a rate hike by December.
  • 4G decision day: Thursday is the deadline for existing mobile network operators to accept final terms for 4G mobile broadband network licenses.
  • N Gage Consulting will hold a workshop on the New Administrative Capital.

On The Horizon

Vacation days through year’s end: Keep a close eye on the week of 2 October, which will be truncated — and which could be bookended by two long weekends:

  • Islamic New Year could fall on Sunday, 2 October or Monday, 3 October. It’s a national holiday.
  • Armed Forces Day (6 October) falls this year on a Thursday, so you’re safe to make plans for a three-day weekend there.
  • November appears vacation-free — let us know if we’re mistaken, folks. (Unless you’re declaring, as so many do, that US Thanksgiving is a personal holiday and taking a long weekend 24-26 November.)
  • The Prophet’s Birthday will fall on 11 or 12 December, presenting the possibility of another long weekend there.
  • Western Christmas is on Sunday, 25 January
  • New Year’s Day is on Sunday, 1 January

Speed Round

Speed Round is presented in association with

The Ismail government has secured preliminary agreements for the supplementary funding it needs to unlock the IMF funding agreement, a central bank official told Al Mal. The IMF had asked Egypt to secure USD 6 bn in funding to release the first tranche of its USD 12 bn, three-year extended fund facility. The staff level agreement with the IMF has made a number of GCC countries more eager to assist Egypt financially, the official said.

Egypt already received USD 1 bn from the World Bank, the first tranche of a three-year, USD 3 bn funding agreement, the Bank said in a statement. “The money will be used to create jobs and improve citizens’ living standards,” International Cooperation Minister Sahar Nasr told Bloomberg, adding that “the government is already working on finalizing the second tranche from the World Bank, as well as from the African Development Bank.”

The WB will inject USD 8 bn in Egypt until 2019 to finance development projects, Asad Alam, Country Director for Egypt, Yemen, and Djibouti told Ahram Gate. Alam says the most recent funding aims to help Egypt with its fiscal adjustment, increase reliance on sustainable energy, improve competitiveness, and attract investment.

Egypt’s eurobond issuance will be in the USD 2.5-3 bn range and will take place any time in the coming four to eight weeks, Finance Minister Amr El Garhy told Youm7 last week on the sidelines of his keynote speech at the 6th EFG Hermes London MENA and Frontier Conference. This comes as the National Bank of Egypt (NBE) is planning to raise between USD 600 mn and USD 1 bn through its own international bond issuance sometime in 1Q17, Chairman Hisham Okasha said, according to Youm7.

“We were on the slow pace in responding to what’s happening to the economy and we have to move in my opinion a bit faster,” El Garhy told global investors at the EFG Hermes conference, according to Forbes’ Dominic Dudley. “The years since the 2011 revolution had seen the country make ‘a textbook of mistakes’,” he says. Now, Dudley says, Egypt is accelerating the pace of reforms and is set for an EGP devaluation that observers could bring the FX rate down to EGP 11.5-12.0 per USD 1. The arrival of the first tranche of the WB loan underscores the potential of the Egyptian economy in light of the reforms undertaken such as the value-added tax.

Brace yourselves, ladies and gents: The VAT became law while you were on break: President Abdel Fattah El Sisi ratified on Wednesday, 7 September the VAT law passed by the House of Representatives, Al-Ahram reports. The executive regulations governing the tax and its implementation will be issued within 30 days, Ahram Online says. The law allows for a three-month grace period for businesses to register for and become compliant with the law, according to Al Masry Al Youm. The Finance Ministry said it will also hold a number of meeting with business representatives to explain the law and how it will be implemented.

KLM Royal Dutch Airlines will indefinitely suspend flights to Cairo starting 8 January 2017, according to a statement by the carrier last week, citing“the devaluation of the Egyptian pound and the decision of the Central Bank of Egypt to impose restrictions on the transfer of foreign currency out of Egypt.” Following the end of direct service in January, KLM will operate under Air France, running six flights a week from Amsterdam to Cairo with a layover in Paris. The International Air Transport Association (IATA) had said as recently as last month that they were “working together” with Egyptian authorities to repatriate blocked funds owed to foreign airlines after having named Egypt as one of the top five worst offenders globally (autoplay video) for blocking funds to airlines. The CBE and the Tourism Ministry are reportedly mulling solutions to address KLM’s concerns and will soon announce a framework to repatriate airline’s profits in Egypt, according to Al Borsa.

The Agriculture Ministry’s wheat ban just (predictably) blew up in our faces, and the implications could be far-reaching: The General Authority for Supply Commodities (GASC), the nation’s wheat importer, received exactly zero offers in response to its tender on Friday, Reuters reports, noting, “Friday’s cancellation comes amid a flurry of cargoes either rejected or held from export since Egypt reinstated a zero tolerance policy on ergot last month and applied it retroactively to all outstanding contracts.”

The news came after Egyptian inspectors rejected a 60k tonne cargo of Russian wheat in Novorossiisk and an earlier failure to accept a 63k tonne shipment from Romania last week, for which the Romanian trader is demanding the return of its USD 500k performance bond, Bloomberg adds. Reuters suggests Egypt will be cut-off from the global grain market for the foreseeable future, quoting a trader as saying “The risk of offering in GASC’s tenders is simply too high at the present time. It is foolish to offer something you know you cannot deliver and zero ergot is not possible.” Last Friday’s tender is GASC’s third since it began implementing a zero tolerance policy on ergot.

GASC’s next tender for a 15-25 October shipment closes on Friday, and traders say they expect that offers on the tender may once again be limited. As one industry insider told us: “Egypt won’t get real offers for another 2-3 months.”

The wheat flap is threatening Egyptian fruit and vegetable exports, the Associated Press reports. Russian food safety watchdog Rosselkhoznadzor “said Friday that imports of Egyptian plant products will be banned starting [this coming] Thursday until Egypt’s authorities take steps to ensure their safety.” The newswire suggests the ban is retaliation for the rejection of Russian wheat shipments, noting, “Russia often slapped bans on agricultural imports amid political or economic disputes with other nations, citing sanitary reasons.”

A prime example of this retaliatory behavior was in November of last year when the diplomatic flap between Russia and Turkey over the latter’s downing of a military aircraft resulted in Russia tightening controls on Turkish agricultural imports. Just one month later, Egypt had hoped to capitalize on the short-lived fallout between Russia and Turkey by moving to increase its agricultural exports to Russia to fill the gap. However, even this goal was, at least initially, foiled due to an aviation technical malfunction for the first export shipment, Al Mal reported at the time.

Kabil meets Russian ambassador: An Egyptian delegation will visit Moscow by the end of the month to discuss the Russian ban, Trade and Industry Minister Tarek Kabil told Al Mal after meeting with Russia’s ambassador to Egypt, Sergei Kabachenko, on Saturday morning. Cabinet also held an “emergency meeting” Saturday morning, Agriculture Ministry spokesperson Eid Hawash told Al Borsa. Hawash denied a connection between the incident and the ergot policy, while former head of the Agricultural Export Council Ali Eissa said that a “crisis” is expected, adding that Russia takes in more than 40% of Egypt’s agricultural exports.

Global dragnet on Egyptian strawberries expands: While the state-owned domestic media has in the past blamed the US Hepatitis A outbreak linked to Egyptian strawberries as part of a conspiracy to destroy Egypt, Saudi has reportedly long maintained an import ban on Egyptian agricultural products, Okaz reported. The Saudi Food and Drug Authority was apparently among the first to institute a ban on a number of Egyptian fruits and vegetables earlier this year after testing allegedly found them to not be suitable for consumption, Saudi importers tell the newspaper. The UAE has now implemented tightened controls on imports of Egyptian strawberries, the UAE’s state-owned The National reported on Saturday, citing the UAE Ministry of Climate Change and Environment. Jordan’s agriculture ministry is also investigating Egyptian strawberries following the US outbreak and the Russian ban, the Jordan Times reported on Saturday. We’d previously noted just last month that Egypt and Jordan were set to sign an agreement for the export of Egyptian strawberries to Jordan.

This comes as the Agriculture Ministry denied reports that the US Food and Drug Administration (FDA) imposed new bans on the entry of some Egyptian dairy products into the US, correctly noting that the FDA had merely reposted bans on Egyptian products that were made in 2009, 2010 and 2014 as part of a routine update to the FDA’s website, as noted by Al Mal.

The headline inflation rate accelerated to 15.47% in August from 14.0% in July, its highest level in over seven years. The core inflation rate, compiled by the CBE, rose to 13.25% in August, up from 12.31% a month earlier. “Food and beverage prices, which account for the largest component of the basket of goods and services, climbed 19.3% y-o-y,” Bloomberg says, attributing the rise to increases in electricity prices and the weaker EGP. “August’s jump in the headline inflation figure appeared to signal a resumption in the upward trend in prices,” Reuters notes.

The Ismail cabinet has approved the updated automotive directive and will pass it on to the House of Representatives when parliament reconvenes from recess in October, said the head of the Egyptian Automotive Feeder Industry Association Ali Tawfik. The bill would provide customs breaks for imported components, access to credit, and free land for domestic and international companies looking to build manufacturing facilities. Parallel incentives would encourage the industry to export production, and all incentives are conditional on participating companies boosting domestic content in their vehicles to 80% within five years, Tawfik tells Al Borsa. The strategy aims to see Egypt develop the capacity to manufacture 1 mn vehicles a year and create a total of 6 mn direct and indirect jobs. Phase one will target an annual capacity of 100k vehicles. The strategy will also benefit from tax rebates on exports under the value-added tax legislation, said Customs Authority Magy Abdel Aziz. Automotive assemblers hope the strategy will protect jobs and businesses threatened by what they claim is unfair competition from Turkish, Moroccan and European Union imports.

Feed-in tariff (FiT) companies now have until 8 October to decide on whether to stick with phase-one projects and accept domestic arbitration or move to phase two, according to a notice sent by the head of the Electricity Holding Company Gaber Dessouky, Al Borsa reports. Under the terms of phase two, companies can expect a lower tariff rate, but have the option to pursue international arbitration on appeal. Meanwhile, Infinity Solar, Summit Egypt, and Saudi’s Al Fanar are reportedly set to meet the 26 October deadline to close on their phase one solar projects, signing agreements to cover the 85% foreign funding requirement, Electricity Ministry sources tell the newspaper.

Majid Al Futtaim (MAF) announced it will open its Mall of Egypt in March 2017, according to a company statement. The mall will include Africa’s first indoor ski slope and the country’s first VOX cinemas. MAF also plans to start mixed-use real estate development in Egypt in 2017 as it expands from its core retail activities, Sananda Sahoo writes for The National. The CEO of MAF Communities said the company is awaiting land acquisition, without providing further details. “While the capital repatriation restrictions are off-putting to other investors [those from the Gulf] take this into account and often reinvest, partially mitigating the effect … More recently we are seeing investors looking at the education and healthcare sectors both as real estate investment and as business opportunities,” says Ian Albert, regional director for the Middle East and North Africa at consultancy Colliers International.

Crédit Agricole announced it is resuming some international internet transactions using its credit and prepaid cards, according to a statement on its website. The bank still bars its customers from using any of its cards to withdraw cash abroad and is maintaining a ban on international cash withdrawals on prepaid cards. The highest monthly purchase limit is for USD 4,000 for holders of the bank’s Infinite Credit Card, followed by the USD 2,000 for Platinum and Fidele Card customers. Crédit Agricole Egypt card usage is still suspended in Indonesia, China, Nepal, Thailand, and the Dominican Republic.

Domty won EXG approval on Saturday to issue global depository receipts on the London Stock Exchange, Al Borsa reports. The EGX approved the conversion of 10 mn shares or 3.5% of the company’s stock to GDRs; one GDR will represent five underlying Domty local shares.

“Egypt gives GPG a haircut.” –Politico. The high-metabolism US politics site’s Influence tipsheet notes that “Egypt downgraded the Glover Park Group‘s monthly fee to USD 166,667 from USD 250,000, retroactively effective as of last October.” Politico gives no further explanation for the 33% cut. GPG was founded 15 years ago by former White House and Democratic campaign officials.

MOVES- Khaled Hegazy has left his post as Vodafone Egypt’s director of external and legal affairs for an undisclosed post at Etisalat Misr. Hegazy told Al Shorouk he’ll assume his new role in November, but stopped short of specifying what his new role will be.

MOVES- Egyptian-born economist Nemat “Minouche” Shafik will become the first female director of the London School of Economics and will take office on 1 September 2017, according to a statement from the LSE. The former IMF deputy director announced she will step down as deputy governor of the Bank of England in February after two years on the job to take the LSE post.

Egypt reaches final compensation agreement with families of slain Mexican tourists: The families of Mexican tourists killed in an air attack by the Egyptian military will receive an undisclosed sum after Eid Al Adha (which we take to mean “as early as this week”) after the Mexican government reached an agreement with the Egyptian Travel Agents Association, a nongovernmental industry group, Reuters reported last week. Military aircraft attacked the convoy on the Western Desert in September 2015, apparently mistaking the convoy for terrorists. The agreement also includes arrangements for Egypt to construct a memorial to honor both the Mexicans and Egyptians slain in incident.

CORRECTION- Readers may recall that in our Wednesday, 7 September issue, we mocked the House of Representatives for failing to publish their customary end of session report. Well, we were wrong — it came out after we had finished searching for it the night before, and you may find it here in its entirety courtesy of the useful nerds at Parlmany [Arabic]. Don’t know or remember what we’re talking about? Oh. Ok, haha, nevermind. Hey, what was that over there?

The Macro Picture

US Fed rate hike? Reuters suggests it’s pretty unlikely there will be a rate hike at the US Federal Reserve’s Tuesday-Wednesday meeting after economic indicators last week suggested a slowdown in US retail sales and a manufacturing slowdown.

Active fund managers are having a really bad year: From New York, Stephen Foley and former Mideast hand Robin Wigglesworth write in the Financial Times that it’s a “fresh blow for stockpickers” as “nine out of ten US equity funds failed to beat the market over the past year.” The “scale of the disappointment in recent figures” in the report from S&P “is likely to fuel further outflows from an industry that is already under pressure.”

A looming global market meltdown? If you, like us, were a bit disconcerted to have your Eid vacation disturbed by an alert from the WSJ that the selloff in global stocks had accelerated, you may now rest (a bit) easier. The Journal is suggesting that last week’s sell-off could be short-lived, but warns that the dumping of developed market government debt will probably have a negative impact on EM offerings. (This, we remind you, comes as Egypt hits the road with its eurobond offering.) Either way, Reuters’ Friday global markets wrap-up makes for very ugly reading. Into the fray wades Mohamed El Erian, who warns that it may not be time to “buy the dip,” writing: “Without a significant improvement in fundamentals, investors would be well-advised to remember that there is an impending limit to how much liquidity injections can protect markets from the underlying economic reality.” Either way, it probably won’t be pretty for EM equities when the Fed gets around to raising rates, as Bloomberg reminds us.

Egypt in the News

The timing could not be worse: Criminal Court upholds asset freeze for NGOs. The top story on Egypt in the international press this morning is news that the Cairo Criminal Court has upheld a freeze on the assets of five human rights activists on Saturday, including Hossam Bahgat. An asset freeze has also been placed on the Cairo Institute for Human Rights Studies, the Hisham Mubarak Law Center and the Egyptian Center on the Right to Education. The freeze comes as part of the investigation of foreign funding of NGOs launched in 2011.

The story has been front-page news since yesterday afternoon in the digital edition of the Financial Times, and wire service coverage from Reuters and the Associated Press is getting wide pickup across the political spectrum, including the New York Times and the Washington Post. With President Abdel Fattah El Sisi due this week in New York for UN meetings, we expect human rights issues to be even more pronounced on his agenda. Also likely to come up during the New York trip: Egypt’s new law on construction of churches, which Human Rights Watch argued late last week discriminates against Christians. For an in-depth analysis of the law, see ‘Nothing new under the sun: Egypt’s church construction law’ by Eshhad’s Jay Roddy.

TechCrunch took note of Ousta’s USD 1.25 mn-equivalent bridge investment, on which we reported in August. “This is one of the largest investment deals in a tech startup in Egypt,” Radwa Rashad writes.

Price increases are pushing poor Egyptians away from second-hand markets, according to a Xinhua feature about the Wekalat El Balah market. One vendor said the market was a refuge for those who cannot afford new clothes, “but it is no longer the right place for the poor after the recent price hikes.”

Also making headlines in the international press over the Eid Al-Adha holiday:

  • Military and the economy: Bloomberg uses the Army’s role in restoring the supply of subsidised infant formula as a way into a longer piece looking at the military’s role in the economy.
  • Egypt’s natural gas ambitions: Noting that “Egypt’s gas demand is 52bn m³/yr and is expected to continue rising and may reach 65-70bn m³/yr over the next ten years,” Natural Gas World magazine (paywall) notes that “Egypt has attracted large and small producers, thanks to higher well-head prices and favourable geology. Its ultimate goal is not only self-sufficiency but a surplus for exports.”
  • Shame on the English: Mohamed El Dahshan’s tweetstorm is making headlines in the Huffington Post after UK authorities capriciously denied his emeritus professor father’s request for a visa to see his son deliver a valedictory address at Oxford.
  • US Navy urged to make contingency plans for loss of Suez Canal access: The United States needs to work with Egypt to improve security in the Suez Canal area (including Sinai) and / or “develop operational plans and even structure the fleet with the risk of losing Suez in mind,” two RAND Corporation engineers write for The National Interest.
  • Regeni updates: The New York Times reported that murdered Italian graduate student was “under investigation in Egypt” prior to his murder according to a joint statement issued by Italian and Egyptian prosecutors, with the Egyptian side saying it had been determined that Regeni’s activities “were not of interest to national security.” A day later, the global press reported that a post-mortem examination by Italian authorities found “mysterious letters carved into [Regeni’s] body.” Further, investigators admitted that there are “weak doubts” about the culpability of four petty criminals killed by Egyptian police in a shootout who were subsequently blamed for Regeni’s death.

Image of the Day

Fellowship of the dig: Egypt-based archaeologist Sarah Parcak stands at a royal necropolis in South Dashur, from a National Geographic piece penned by the field researcher last week where she compares the life of archeologists to that of hobbits.

Worth Watching

The future is here — which is great, because many of us have been getting inconsolably cranky waiting for it arrive: Uber has launched its first fleet of driverless cars. The limited roll-out began in Pittsburgh, Pennsylvania. The cars still have human drivers seated in the driver’s seat for safety, but they haven’t had to intervene — so far, at least. (Watch Here’s what it’s like to ride Uber’s new self-driving cars via Bloomberg, 1:46)

Diplomacy + Foreign Trade

Russia isn’t ready to lift its ban on direct flights to Egypt: Russian investigators left Cairo last week unimpressed, according to reports in Russian media. News website RBTH quotes a Russian-language report in the business newspaper Kommersant as saying “Russian security services oppose [the] restoration of flights to Egypt” because “the safety measures recommended by Russia are so far only ‘85 percent’ implemented.” Russian officials also reportedly “expressed doubts about the quality of the [Egyptian airport] personnel.”

Egypt at loggerheads with France, on the same page as Russia in probes into air disasters: Egyptian and Russian investigators issued a joint statement on Thursday, 8 September saying they identified the point at which Metrojet flight 9268 began disintegrating, Reuters reports. The statement came after the two sides finished piecing together the remains of the Airbus A321, which crashed over Sinai on Halloween Day 2015, killing all 224 people on board. The RBTH report alleges the bomb was planted in the oversized luggage area, meaning “it has been almost certainly established that the terrorists were assisted by one of the airport staff.”

Relations between French and Egyptian investigators probing the crash of EgyptAir flight 804 are reportedly on the rocks, Le Figaro (paywall, French) reports. The center-right daily reports that French investigators discovered traces of the explosive TNT on wreckage from the downed Airbus A320. French investigators have refused to write a joint report with Egypt confirming the TNT find, saying they were unable to carry out a proper inspection to confirm how the TNT got on the wreckage. We’re told the discovery, if confirmed, would reinforce Egypt’s contention that the crash was the result of terrorism — and runs counter to the preferred French thesis that a maintenance issue brought down the jetliner in May 2016. Proof that the crash was the result of a terror attack would call into question security procedures at Paris’ Charles de Gaulle airport. Reuters has picked up the Figaro report in English.

Egypt takes delivery of second Mistral-class ‘copter carrier from France: Elsewhere in the Egypt-France-Russia love triangle, the Egyptian navy took delivery on Friday of the second of two Mistral-class helicopter carriers originally built for Russia. The ship, renamed the Anwar Sadat, will sail from port in Saint-Nazaire this week for joint exercises with the French navy before heading to its new home port of Alexandria to join the Mistral-class Gamal Abdel Nasser (photo). Notes Reuters: “The Mistral is known as the ‘Swiss army knife’ of the French navy for its versatility. Capable of carrying vessels and tanks, they will serve as command centers for the Egyptian fleet.”

GIZ to remain in Egypt until 2020: The German government has agreed to extend the operational mandate of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Egypt until 2020, Ahram Gate reported. GIZ was supposed to conclude its operations in Egypt in 2017, but will now continue supporting local industry throughout its extended mandate.

Egypt is set to sign an EUR 500 mn loan agreement with the European Investment Bank (EIB) in October to support the SME sector, according to a government statement. Additionally, a EUR 75 mn agreement will be signed to finance the purchase of 13 trains for the Cairo Metro. As we had reported earlier, EIB was studying increasing its current EUR 7.4 bn investments in Egypt.

Energy

Eni reaches record production from Nooros

Eni announced it reached record production ahead of time from its Nooros field. Eni says Nooros, which was put into production in September 2015, is producing 700 mcf/d, equivalent t 128k bbl of oil equivalent per day. Eni says “This record—setting production represents an important milestone achieved just 13 months after the discovery and ahead of schedule thanks to the success of the last exploration wells drilled in the area of ​​Nidoco and the drilling of new development wells…The gas and condensate produced are sent to Abu Madi’s treatment system, located 25 kilometers from the discovery and then allocated in the Egyptian network.” Eni, through its subsidiary IEOC holds a 75% interest in the concession while BP controls the remaining 25%.

Steel sector still hoping for cheaper energy

Refusing to “lower industrial gas and electricity prices despite an improving supply situation is causing pain in some sectors of the economy,” Rachel Williamson writes for Interfax Global Energy. The steel sector was hoping for a price reduction as well as for agreements to be repriced in EGP instead of USD, she says. However, SDX Energy Country Manager Ahmed Moazz says producers, including the steel sector, are receiving subsidised energy but not passing on the cheaper costs to consumers. “All industries bar iron and steel had so far absorbed the higher gas prices,” Federation of Egyptian Industries Deputy Chairman Tarek Tawfik said.

Manufacturing

Minimum bidding on cement licenses to become EGP 120-150 mn

Bidding for new cement licenses will open at EGP 120-150 mn, the Industrial Development Authority has reported, according to Al Borsa, a move initially expected last month. Cabinet set the price according to the average bids at the auction for cement licenses in 2007. Six companies, including El Sewedy Cement, Jushi Egypt, South Valley Cement, Misr Beni Suef Cement, and Royal El Minya for Cement applied for eight of the new 14 licenses on offer.

Real Estate + Housing

Heliopolis Housing launches “mini-compound” project

Heliopolis Housing announced it has commissioned contractors affiliated with the Holding Company for Construction and Development to complete its “mini-compound” project. According to a bourse statement, the compound is located in New Heliopolis, built over 12k sqm approximately, and will be delivered in two years. It includes 20 twin villas and four standalone houses.

Tourism

Egypt could be “back” this winter, German tour operators say

“Egypt could come back well this winter,” Stefan Baumert, Director Product & Trading for TUI Germany, said talking about tourism in Egypt at the fvw Kongress in Essen. Looking specifically at Egypt and Turkey, the panel said the two destinations remain “irreplaceable” for German tourists and that “bookings appear to have stabilised in recent weeks.” Fvw adds that “in terms of Egypt, where FTI is market leader, [CEO of FTI Group Dietmar Gunz] emphasized that the German tour operator had not steered customers to alternative destinations and would end the year with a single-digit drop in bookings for the country.”

Meanwhile, Turkish Airlines has resumed regular flights to Sharm El Sheikh Airport last Sunday after a hiatus of almost one year. The airline plans to fly to Sharm El Sheikh four times a week, Ahram Online says.

Telecoms + ICT

MNOs petition Prime Minister to change 4G licence, NTRA to determine price increase on mobile phone recharge cards today

Existing mobile network operators are asking that Prime Minister Sherif Ismail intervene in the brewing crisis over the license framework for 4G services, which they claim favor state-owned Telecom Egypt, Al Mal reports. Among the issues: TE’s sole ownership of fixed-line infrastructure and its 45% stake in Vodafone Egypt. The newspaper says the MNOs are expected to meet with both Ismail and ICT Minister Yasser El Qady to hash out their grievances. While a date was not given for the meeting, MNOs have until this coming Thursday to decide on whether to accept the terms of 4G agreement or open the bidding to at least one foreign new entrant.

Automotive + Transportation

EgyptAir Cargo starts freighter operations to Ras Al Khaimah Airport

EgyptAir Cargo has begun freight operations at Ras Al Khaimah International Airport, according to Gulf News. The service begins with a with a weekly flight from Cairo with the possibility of expansion in the future.

Other Business News of Note

Indorama looking to invest USD 650 mn in Egypt

Indonesian investment company Indorama Corporation is looking to invest USD 650 mn over the next three years in Egypt, Al Shorouk reported, citing an Investment Ministry statement. Indorama’s managing director met with the Mohamed Khodeir, GAFI’s chairman to discuss the company’s return to Egypt. A court had renationalised Indorama-owned Shebin Textiles in 2011, and the company was awarded USD 50 mn in compensation.

National Security

Russia may begin servicing, producing military hardware in Egypt -TASS

Russia is considering servicing and even producing military hardware from within Egypt, Russian state news agency TASS reported earlier this month, citing statements made by Russian Industry and Trade Minister Denis Manturov on the sidelines of Russia’s Army 2016 forum. Speaking on Egypt’s manufacturing capacity, Manturov said “The plants are in a good condition, of course they require additional modernization, but they are capable of also ensuring assembly if the talk is about local production of some components and organization of joint production.”

On Your Way Out

Toll on Cairo-Alex highway to double for passenger cars: Starting from 1 November, the toll to use the Cairo-Alexandria Desert Road will double to EGP 10 a trip for passenger cars. The new price scheme also allows for an EGP 150 monthly pass. The road is currently managed by the National Company for Roads, a subsidiary of the Defence Ministry.

Marry an Israeli and you’re no longer Egyptian, court says: An Egyptian administrative court ruled that marriage to an Israeli citizen translates to losing the Egyptian nationality, Ahram Online reported. The ruling came after a fairly perverse case on of one woman who “filed a lawsuit demanding the interior minister and prime minister strip her brother, who has been living in the UK for 12 years, of his Egyptian citizenship because he is married to an Israeli woman and has children with her.”

The Carnegie Middle East Center announced the launch of its new blog, Diwan. The blog will include commentary from Carnegie scholars on a wide range of Middle East topics, as well as a new home for Syria in Crisis.

In keeping with the theme of this morning’s issue, here is a picture of a kitchen sink. We think you’re going to like it.

The markets yesterday

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USD CBE auction (Tuesday, 06 Sep): 8.78 (unchanged since Wednesday, 16 March)
USD parallel market (Saturday, 17 Sep): 12.60 (from 12.75-12.77 on Tuesday, 06 Sep, Al Borsa)

EGX30 (Thursday, 15 Sep): 7,979.3 (-1.9%)
Turnover: EGP 402.0 mn (8% below the 90-day average)
EGX 30 year-to-date: +13.9%

THE MARKET ON THURSDAY: The EGX30 slid deeply into the red on Thursday, closing the session down 1.9%, its biggest one-day drop since 26 June 2016. The benchmark index’s top gainers were Orascom Construction, which rose 3.4% on news it had changed its domicile to Egypt from the UAE in the FTSE Russell Index. Pioneers and Arabia Investments were the only other EGX30 constituents to close in the green, while Juhayna, Eastern Tobacco, TMG and Arabian Cement led the day’s losers. JUFO plunged 7.5% to its lowest level in almost four years on the back of it being excluded from the FTSE Russell Index in its upcoming rebalancing, which is effective from this week. Market turnover stood at EGP 402.0 mn, with foreign investors the sole net sellers of the day.

Foreigners: Net Short | EGP -52.6 mn
Regional: Net Long | EGP +31.0 mn
Domestic: Net Long | EGP +21.6 mn

Retail: 53.2% of total trades | 61.4% of buyers | 45.1% of sellers
Institutions: 46.8% of total trades | 38.6% of buyers | 54.9% of sellers

Foreign: 35.6% of total | 29.1% of buyers | 42.1% of sellers
Regional: 7.7% of total | 11.6% of buyers | 3.9% of sellers
Domestic: 56.7% of total | 59.3% of buyers | 54.0% of sellers

WTI: USD 43.03 (-2.00%)
Brent: USD 45.77 (-1.76%)
Natural Gas (Nymex, futures prices) USD 2.95 MMBtu, (+0.72%, Oct 2016 contract)
Gold: USD 1,313.2 / troy ounce (+0.23%)

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Calendar

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): N Gage Consulting’s New Administrative Capital workshop powered by Hill International, Four Seasons Nile Plaza Hotel, Cairo. Register here.

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.

28 September (Wednesday): Narrative PR Summit organised by CC Plus in partnership with the American University in Cairo, Four Seasons Nile Plaza, Cairo.

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.

31 October (Monday): Deadline for Telecom Egypt to reach an agreement with MNOs over using their 2G and 3G network infrastructure

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.

10-13 December (Saturday-Tuesday): Projex Africa and MS Marmomacc + Samoter Africa, Cairo International Convention Centre.

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.

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