Lamees lashes out at Tarek Amer about banking sector regulation

CIB confirmed to Reuters’ Ehab Farouk yesterday it is allowing clients to buy up to USD 2k each month without requiring any proof of travel, but that any additional sums require documentation. Banque Misr is also allowing its clients to buy up to USD 2,000, but caps it there. A source at National Bank of Egypt did not specify a limit on the amounts offered to clients, noting that it is set at each branch’s discretion and is a function, in part, of the bank’s relationship with any individual client. Arab African International Bank says it is allowing clients to purchase USD “freely.”

The Central Bank of Egypt received a second, USD 1.25 bn installment of the IMF loan yesterday, Al Masry Al Youm reported. The installment will be used to support the central bank’s reserves balance, a source said. It is also the final installment of the first USD 4 bn tranche of the IMF’s USD 12 bn loan to Egypt, Ahram Online notes. We reported yesterday that Finance Minister Amr El Garhy expects a third installment of USD 2 bn to be disbursed by December or January.

Foreign Minister Sameh Shoukry will be heading to Baghdad today to talk cooperation and regional issues with various state officials, AMAY says. On Shoukry’s agenda are meetings with the Iraqi president, vice president, prime minister, foreign minister, and parliament speaker.

Is the investor love affair with emerging market bonds running out of steam? Bloomberg’s Lyubov Pronina thinks so, writing that the longest run of inflows in four years is in jeopardy as appetite declines. Net inflows to the asset class fell more than two thirds to USD 200 mn last week, according to research from Bank of America Merrill Lynch citing EPFR Global data. That’s a third consecutive weekly decline and signals the prospect of an imminent end to the EM funds bull market.

From our friend Andre Valavanis, the newly crowned World Boxing Federation Intercontinental Welterweight Champion, via iMessage immediately after his fight last night: “Just wanted to update you that I won via a third round TKO by forfeit from my opponent and now hold the WBF Intercontinental Welterweight title, improving my record to 9-0 with a 100% knockout ratio.”

Sunday is Revolution Day, and that means it’s a three-day weekend coming up. That’s the only prize we got our eye on this week

We interrupt our talk show hiatus to bring you this late-breaking bulletin from Hona Al Assema, which mounted a broadside against CBE Governor Tarek Amer last night.Thanks, Lamees.

Host Lamees El Hadidi accused Amer of making a power grab through proposed amendments to the central bank and banking acts. Proposed amendments to the two acts would grant “excessive powers” over the banking sector to the CBE governor, Lamees claimed. According to “copies of the draft” (she made sure to hold up a piece of paper in front of the camera), Lamees claims that the bill would give the governor’s office greater oversight and decision making powers over the banking sector’s general assemblies. She also alleged that the bill would concentrate decisionmaking at the bank in the governor’s office, effectively neutering the bank’s board.

The move would also infringe on some of the powers of the presidency and the prime minister, Lamees alleged in a diatribe (watch, runtime: 4:50). The host provided no concrete detail and cited unnamed sources within the industry.

Here is what we know so far of the amendments to both laws: Following a decree setting a nine-year term limit for any bank’s managing director back in March of last year, Deputy Governor Gamal Negm had said that the CBE would amend the CBE Act and conduct a thorough evaluation of the banking sector’s board of directors and executive management. He gave no detail at the time on either move. Last month, Al Borsa reported that amendments to the Banking Act were being drafted and will be completed by August. The amendments would bring non-banking financial institutions under CBE oversight, ostensibly as a means of protecting the interests of retail clients and reducing red tape in the sector. Consultations with the domestic banking industry and international organizations including the IMF were underway, the article had said.

Private sector raise could become mandatory? Business associations signed on Tuesday the initiative that would see 18 mn private sector employees receive a 10% hardship raise, AMAY reports. The raise was set at a minimum EGP 165 and maximum EGP 330 a month and companies are being asked to “voluntarily” implementing the raise as of this month.

Contrary to what Labor Minister Mohamed Saafan said last week, the initiative might become mandatory for businesses if decreed by the House of Representatives after they decide on its final value and implementation mechanism, Rep. Mohamed Wahb Allah tells Ahram Gate. The House’s majority Support Egypt Coalition kicked off talk of the raise last week. The minister had explained, though, that the raise agreement would be non-binding, asking businesses to do it in the spirit of corporate social responsibility.

M&A WATCH- EFG Hermes announced it has entered “into definitive agreements to invest” USD 21.5 mn in Frontier Investment Management (FIM). The transaction, once completed, will leave EFG Hermes owning a 50% stake in FIM, with the remaining half still owned by FIM’s founder and CEO, Hedi Ben Mlouka. FIM will become part of EFG Hermes’ asset management business “while retaining its independence, brand name and autonomy in investing across regional and frontier capital markets.” EFG Hermes says, “FIM will continue executing its current strategy of delivering unique returns to its institutional investor base.” The investment bank will seek the consent of its clients to contribute its regional (non-Egypt related) portfolios and funds into FIM during the coming six months. Through the investment in FIM, EFG Hermes has positioned itself as the manager of choice for institutional investors seeking specialized active fund managers with a strong on the ground knowledge of MENA and frontier markets, said EFG Hermes Group CEO Karim Awad.

…Separately, EFG Hermes expects to serve as debt adviser to three Middle East companies on transactions worth a combined USD 700 mn by the end of 2018. The firm gave no further details about the three companies. EFG Hermes also plans to grow its financial leasing portfolio to EGP 5 bn from about EGP 2 bn currently, said Walid Hassouna, CEO of EFG Hermes Finance and head of the firm’s debt structuring division, told Reuters. The firm has also obtained preliminary approval from Egypt’s financial regulator to begin offering factoring services and could roll out of the offering as early as 4Q2017.

M&A WATCH- Suez Bags is reportedly an acquisition target, sources close to the transaction tell Al Borsa. The company — a subsidiary of Suez Cement — has received two competing bids, one of which reportedly comes from international packaging and paper firm Mondi. Sources did not disclose the second bidder. The newspaper puts the size of the transaction in the neighborhood of EGP 400 mn. The Egyptian Financial Supervisory Authority has approved due diligence for both bidders, which will be completed in two months time. EFG Hermes is reportedly advising on transaction, but the newspaper’s sources did not specify whether it is on the buy or sell side. Zaki Hashem & Partners has confirmed to us that it will be acting as legal adviser to Mondi Group’s bid.

IPO WATCH- Pioneers Holding is set to list 30% of its shares in Rooya Real Estate Investment Company on the EGX in 2H17, board member Khaled El Tayeb tells Reuters. Arab African International Bank was selected to advise on the listing and a local and an international issuance manager will be chosen within weeks, El Tayeb adds. Pioneers currently owns a total of 60% of Rooya’s shares. Rooya CEO Hisham Shoukry had valued the listing at a minimum of EGP 2 bn in November.

Ride-hailing app Uber decided on Tuesday to follow in the footsteps of competitor Careem and hike its fares after recent fuel prices hikes, Daily News Egypt says. The base fare for Uber’s standard service will rise to EGP 6 from EGP 5, while the fare for its premium Uber Select service increased to EGP 7 from EGP 6. The fare for each kilometer traveled was also increased to EGP 1.85 for the standard UberX and EGP 2 for Uber Select. The minimum fare was set at EGP 10 and EGP 15 for the standard and premium services, respectively. The Consumer Protection Authority will be meeting with representatives from both Uber and Careem next week to discuss the fare hikes, authority head Atef Yacoub tells Al Mal.

French market research firm Ipsos is getting an assist from the French embassy in Cairo to try and clear up the order of closure issued by the Manpower Ministry on Monday, according to a note from France’s Foreign Affairs and International Development Ministry. The company had come under scrutiny by the Manpower Ministry for alleged workplace safety violations. Both governments seem to be striking a conciliatory tone about the matter.

Egypt has not suspended exports of grapes, strawberries or any other agricultural product, the Trade and Industry Ministry confirmed in a Tuesday statement picked up by AMAY, dismissing rumors suggesting otherwise. The ministry is working on boosting exports, the statement adds, and recently reached an agreement to begin exporting grapes to China. The newly-established Export Development Authority had rolled out a five-year export promotion strategy for 2017-2023 to streamline processes and enforce strict quality standards, after Saudi Arabia and other countries in the GCC issued temporary bans on imports of Egyptian strawberries and peppers over concerns of high levels of pesticides. The Agriculture Ministry is also working on legislation that would regulate pesticide usage and set heftier penalties for violators.

Supply Ministry announces new wheat milling prices: The Supply Ministry announced it will pay public wheat mills EGP 500 per tonne of wheat, while private mills will receive EGP 480 per tonne. The news came after the ministry reached an agreement with mill owners, ministry spokesman Mohamed Sewed tells Al Borsa. The pricing scheme will be up for review on a bi-annual basis, a stipulation of the mill owners. The Federation of Egyptian Industries had been lobbying for EGP 540 per tonne in exchange for the ministry collecting the wheat bran for the Agriculture Ministry’s livestock projects. The Supply Ministry has presented the proposed prices to the Finance Ministry, along with its plans to stop subsidizing flour for subsidized bread production, to bring the new prices into effect as of the beginning of August, Sewed says.

Cyber Crimes Act could up Egypt’s surveillance game: The Cyber Crimes Act currently being reviewed by justice and communication ministry committees is will facilitate social media surveillance, Rep. Ahmed Refaat, a member of the House’s Communications Committee, said on Tuesday, according to Al Shorouk. This increased surveillance will not infringe on the privacies of law-abiding citizens, Refaat said, explaining that the legislation will oblige security forces to seek authorization before tracking any one specific individual.

New social welfare act under review, looks set to hit the House by early fall: The Council of State (Maglis Al Dawla) has begun its review of the Social Welfare Act in coordination with the Social Solidarity Ministry, a judicial source tells Al Borsa. The council expects to complete its review and send its comments on the bill to the Ismail cabinet for approval by the end of August, before it is sent to the House of Representatives for a vote. If the act were to pass, the Social Solidarity Ministry would establish a new pension fund and set its own investment strategy, Minister Ghada Wali said last month. The law will also index annual pensions increases to inflation and set a minimum pension rate. A World Bank delegation visiting Cairo last month has reviewed the draft bill.

Kuwait Finance House confirmed it is in talks to merge with Ahli United Bank of Bahrain, Reuters reports. The confirmation came in on Tuesday and is the latest in a trend of GCC banking consolidation — something of a knee-jerk reaction when times get tough. We saw it during the financial crisis and recently with the formation of First Abu Dhabi Bank after the drop in oil prices.

The Trump administration imposed a fresh round of sanctions on Iran yesterday after a review of the nuclear accord, according to Reuters. The unilateral sanctions against Iran come ostensibly in response to what the White House considers a violation of the “spirit” of the nuclear agreement. This is the first significant charge out of the Trump administration on foreign policy toward Iran after months of talk.

Coverage of Egypt in the foreign press this morning is dominated by wire pickups of security forces killing a Daesh militant during a raid in North Sinai’s Al Arish. Security forces killed Ahmed Hassan Al-Nashu, a Daesh leader responsible for carrying out terrorist operations and recruiting new members for Ansar Bayt Al Maqdis, according to an Interior Ministry statement. Another militant escaped, the ministry said.

The Trump administration should withhold military aid to Egypt to force the government towards a more “stable” human rights policy, Brian Dooley writes for The Hill. The disbursal of 15% of the US’s foreign military funding is directly tied to human rights reform. US Secretary of State Rex Tillerson and President Donald Trump have been getting heat from Congress members who believe that “Congress should strengthen democratic benchmarks and human rights conditions on US assistance for Egypt,” particularly since a 2016 US law mandates Tillerson to ensure that Egypt “is taking effective steps to protect freedoms of expression, association and peaceful assembly, including the ability of civil society organizations and the media to function without interference."

Climate change, GERD adds to Egypt’s water security challenges: Egypt’s water security is now threatened by climate change, a growing population, and the imminent start of the Grand Ethiopian Renaissance Dam (GERD)’s reservoir filling this month, Aya Nader writes for Climate Change News. “The challenges for farmers are myriad: new diseases and insects, unprecedented humidity, rising seas contaminating groundwater with salt,” writes Nader. As for GERD, its effects are largely unknown yet. “Some studies predict a rise in temperature and thus little rain, and others predict more rain,” says Egyptian member of the tripartite committee on the dam’s effects, Alaa Al Zawahri. The government is working towards improving water access in light of these difficulties by collaborating with five UN organizations on a development project that has provided 150k Minya residents with new filtration technology, according to News Ghana.

Cairo is the most affordable city in which to hire a taxi, according to a survey of prices of a 3km intra-city taxi ride‚ a journey between the airport and the city centre‚ cost per kilometre and the cost of one hour’s waiting time. Mumbai, India is in the second place, Business Day reports. On the other end of the list, Zurich and Geneva are the most expensive to hail a taxi in, according to the survey.

A booming natural gas sector offers a chance at a return to self-sufficiency and a chance to overcome some of Egypt’s economic and social problems, writes Gerald Butt for the Petroleum Economist. Recent discoveries in Egypt’s offshore — Zohr in particular — have convinced IOCs that there’s lots more gas to be found. That coupled with promises to pay back arrears and gas infrastructure already in place, have convinced energy giants to boost exploration and production. This has allowed the Oil Ministry to speed up its plans to turn Egypt into an energy hub by 2018, and become a net exporter of gas in 2019. This can almost assure an end to the energy problems the country has faced and that power shortages are a thing of the past, Butt says.

Sudan’s claims that the Halayeb and Shalatin triangle falls within its territory is “disputed by history because it is mainly based on [the] false assumption that there is a cultural link between the Sudanese people” and the disputed area, Tor Madira Machier writes for the Sudan Tribune. However, historical agreements reached under British colonial rule clearly place the Halayeb area under Egyptian territory, and Sudan’s claims of cultural affiliation with the area do not hold water against these agreements. The dispute between Egypt and Sudan is also part of a trend in Sudanese President Omar Al Bashir’s rule, as is evident by the ongoing controversy between Sudan and South Sudan over the Abyei area, Machier says.

Also worth noting in brief this morning:

• The prosecution and trial of Irish citizen Ibrahim Halawa are “farcical” and have shamed Egypt by falling “far short of acceptable international standards,” The Irish Times says.
• The threat of Daesh in the Sinai and its potential ramifications on the border crossing with Israel, is being looked at in an analysis by I24.
• The attack on tourism in HRG raises the inevitable question of whether the incident will bring slowly recovering tourist numbers to a sputter, Al-Arabiya English says.
• The influence of Daesh? The recent uptick in “lone wolf” terror attacks against Egypt’s Coptic Christians, police force, and tourists comes in response to calls from Daesh to carry out individual operations while flying under the radar, security experts tell Asharq Al Awsat.
• The Agriculture Ministry rejected animal breeder Salah Talaba’s offer to rent and manage the Giza Zoo for EGP 10 mn a year, saying the zoo must remain affordable, according to Al-Monitor.

As each attack targeting Egypt’s tourism leads to criticism of the authorities’ crisis management strategy, it may be wise to take a step back and review what international experts have to say, Mostafa El Naggar writes in Al Masry Al Youm. El Naggar urges the authorities to consult a guide published by the World Tourism Organization in 2005, which outlines measures such as preemptive planning for the worst and the correct promotion tactics to use after a crisis to counteract its negative effects. The most important element to focus on is preemptive security, particularly since the cost of adding an extra layer of security at tourist sites and resorts will always be smaller than the price the entire tourism industry pays for each attack, Al Shorouk’s Emad El Din Hussein says.

Bloomberg’s Tim Lavin writes a neat little piece revolving around Jesse Eisinger’s The Chickensh** Club, a book that delves a little deeper into something we all know: Rich white collar crooks get away with it. White collar crime is as old as white collar work, but never has it been more sensationalized than in the Information Age in which we live. The article looks into the fact that to appreciate what the agencies do (or don’t do) to combat white collar crime, we have to look at a mucher larger piece of bureaucratic history than the more recent build up. It’s a nice, quick read and has us putting The Chickensh** Club on our list.

A portrait of restoration in Old Cairo: Egyptian architecture and urban discourse blog Cairobserver pointed us to a 2001 documentary by Elizabeth Fernea called Living with the Past. It’s a filmic portrait of the Darb El Ahmar district of Cairo that is “in the heart of the old city” and “now facing a process of radical change.” Living with the Past “documents a unique approach to historic preservation, one that combines social and economic development with monument restoration,” Cairobserver says, where restoration does not involve displacing people or demolishing neighbourhoods. Fernea follows several restoration projects that were in progress at the time, including Bab Zuwayla and the Church of the Virgin (runtime 52:56).

Prime Minister Sherif Ismail talked cooperation with Moroccan Industry, Investment, Trade and Digital Economy Minister Moulay Hafid Elalamy, Al Shorouk reports. Textiles and manufacturing featured in the discussion. Egypt and Morocco also want to boost bilateral trade, especially in auto manufacturing. Trade and Industry Minister Tarek Kabil also agreed with Elalamy to form an action group to promote economic cooperation between the two countries, Xinhua Net reports.

Turkish potentate Recep Tayyip Erdogan will try to his hand at shuttle diplomacy with trips planned to Saudi Arabia, Kuwait, and Qatar next week in a bid to mediate between the countries, Bloomberg reports.

The Electricity Ministry will not be issuing a set feed-in tariff (FiT) rate for waste-to-energy projects and instead will set the fees on a case-by-case basis, said Electricity Minister Mohamed Shaker. It will make its determination based on the offers investors present, he tells Al Borsa. The ministry had initially settled on a FiT of EGP 1.45 per kWh last month, but had received offers from foreign companies at varying rates. As for the FiT program for renewable energy, Shaker said that the program would not be extended past phase 2, adding that the ministry will be issuing tenders on all subsequent solar and wind projects with the FiT being set based on the specific project. The move would in theory give the ministry more flexibility in determining the price it will be pay for these projects. Shaker also noted multilateral finance institutions have committed USD 3 bn in funding to phase 2 of the FiT program. In other ministry news, Shaker reminded us that there is still no date by which the Dabaa phantom project will be signed, sealed and delivered.

Enppi completed construction work at the Yasref export refinery in Saudi Arabia’s Yanbu, an unnamed official tells Al Mal on Tuesday. The contract was awarded in 2015. Yasref is a Sinopec and Aramco JV in Saudi Arabia.

Royal Dutch Shell and Malaysia’s Petronas will begin work on phase 9B of the Borollos gas field in 4Q2017, after having suspended work last year over pricing disagreements with the government, Oil Minister Tarek El Molla said, according to Al Shorouk. The two sides eventually reached an agreement, but work on the field later stalled again as the state fell behind on payments to Shell and BG. The USD 950 mn project will produce between 350 and 400 mcf/d once operational.

President Abdel Fattah El Sisi met with Chinese officials on Tuesday to discuss details of a proposed electric rail project connecting the new administrative capital to greater Cairo, a brief item from Al Shorouk notes. Some of the talking points of the meeting included job creation from the construction of stations and the rail lines and the potential reduction of road congestion. The president also stressed the need to push the deadline to complete construction within two years. The story gets a shout in Al Mal as well.

Egypt’s profit share from the Sukari gold mine in 2017 is expected to reach USD 70-80 mn after mine operator Centamin recovers its costs, an unnamed government official tells Al Mal. The company had said in February that it was expecting to pay Egypt USD 100 mn in 2017. Centamin had announced last week that its preliminary gold production from the Sukari gold mine dropped 11% year-on-year in 2Q2017 to 124.6k ounces, but that the company was on track to reach its target of producing 540k ounces this year.

Farmers are concerned about their ability to build capacity, meet current debt obligations and increase output as a result of the latest 200 bps interest rate hike, one farmer told Al Mal. Cutting fuel subsidies and the EGP float was also cited as a concern for farmers. He adds many farmers doubt they will be able to remain in business, as the state refuses to increase the prices at which it buys their crops sufficiently, regardless of the increased cost of business they are suffering from. This came as the Agriculture Ministry may announce new, higher prices for purchasing local cotton after farmers objected to the prices it set earlier this week, an unnamed ministry source tells Al Mal..

The General Authority for Supply Commodities (GASC) purchased 300k tonnes of Russian, Romanian, and French wheat in an international tender on Tuesday, Al Mal reports.

Cypriot pharma company Medochemie wants to build a EUR 20 mn manufacturing facility in Egypt, company representatives told Industrial Development Authority Chairman Ahmed Abdel Razek, according to Al Masry Al Youm.

Planning Minister Hala El Said signed an MoU with Banque Misr Chairman Mohamed El Etreby and NBE Chairman Hisham Okasha for a EGP 400 mn grant to finance educational and training programs for state bureaucrats, Al Mal reports. The grant will be disbursed over two years and aims to improve the performance and efficiency of the public sector through master’s programs in entrepreneurship in cooperation with Cambridge University and Cairo University’s Economics and Political Science Faculty, in addition to other scholarships. The grant will also fund an expansion of business incubators inside universities.

Banque Misr announced on Tuesday that it will be financing 60% of the first phase of the Transport Authority’s “Transport Egypt” project, Youm7 reports. The financing facility will be in conjunction with a central bank initiative to promote domestic SMEs. The facility will be extended at 5% interest and aims to bring 50 minibuses and 500 buses into service.

The CBE signed a five-year agreement with Nile University to support entrepreneurs, according to a statement from the central bank. Under the agreement, the university will establish incubators with bank funding and provide technical support to SMEs.

French auto parts maker Valeo intends to create 500 jobs at their operation in Smart Village, a company vice-president said in a meeting in France yesterday with Yasser El Kady, Minister of Communication, Al Mal reports.

Investment and International Cooperation Minister Sahar Nasr and Immigration Minister Nabila Makram launched a campaign to encourage Egyptians abroad to invest in Egypt, according to a ministry statement. The agreement sets up a dedicated office at the Investors Services Center to serve Egyptians who live abroad.

Andersen Global is opening up shop in Egypt after signing a partnership agreement with local tax and legal firm Maher Milad Iskander and Company, according to International Tax Review. The move is part of a global expansion by Andersen which signed similar agreements in Turkey and Germany over the past month.

The government is planning to launch development and housing projects in Halayeb and Shalatin, including two ports in Abu Ramad and Shalateen at a cost of EGP 270 mn, Red Sea Governor Ahmed Abdallah told the press yesterday, Al Masry Al Youm reports. Work on the ports will begin next week and wrap within a year. The government will also launch an EGP 700 mn housing project in Abu Ramad, Halayeb, and Shalatin, for which the Tahya Misr Fund will contribute financing. The launch of the projects comes amid ongoing tension between Egypt and Sudan over ownership of the Halayeb and Shalatin triangle, which officials have been downplaying. Foreign Minister Sameh Shoukry is scheduled to visit Khartoum at the end of the month.

Remittances from expatriate Egyptians increased by 11% y-o-y in May to USD 1.7 bn, the central bank said. Reuters reports that the amount increased from the USD 1.5 bn recorded in May 2016.

Russia negotiate with Egypt at the MAKS-2017 international airshow for the delivery of Ka-52K helicopters to be used on the Mistral-class carriers, Director of Russia’s Federal Service for Military and Technical Cooperation Dmitry Shugayev said, according to TASS. This comes as the first three Ka-52 helicopters built at Progress Plant were accepted by Egypt, a source in the Russian defense industry told TASS on Tuesday. Egyptian pilots are currently undergoing helicopter training, the source said. It was reported in June that Egypt had reached an agreement to acquire Ka-52K helicopters, instead of the conventional Ka-52 Alligators agreed to in 2015.

The UK embassy launched a scholarship program that will see 2k Egyptian oil and gas sector employees attend training programs over the next five years, Ahram Online reports. The Oil and Gas International Scholarship Program was designed by the International Academy for Advanced Research and Studies and its training partner Pearson, in cooperation with Oil and Gas Skills Egypt.