The shorts are coming…

State-owned enterprises will be in the spotlight today as we expect the Ministry of Public Enterprise to start announcing multiple overhaults drives that will see SOCs forced to restructure both their debt and their organizations. The move is a prelude, in some cases, to new partnerships with the private sector and potential stake sales The drive comes as Minister Khaled Badawy announced yesterday that the government plans to offer another 4% of Eastern Tobacco to investors. We have more on this in today’s Speed Round.

EXCLUSIVE- Among those restructuring are the Cotton & Textile Industries Holding Company, which will announce today an agreement to restructure EGP 8.7 bn in debt it owes to the state National Investment Bank (NIB), CEO Ahmed Moustafa tells Enterprise. The announcement could be a prelude to an asset sale to the private sector. The transaction will see some EGP 2.7 bn in debt swapped for equity, raising NIB’s stake in the company to 20%. The remainder of the debt will be repaid through asset sales. Moustafa had told us last week that the company will also shed some assets to pay off EGP 2 bn in late electricity and gas bills owed to the government.

On a related matter, state auto companies appear are meandering toward the the Nasserist dream of an Egyptian car in the age of the long-awaited Automotive Directive, sources tell us, as the drive to have a bunch of them merge continues. El Nasr Automotive Manufacturing is said to be among them. Don’t hold your breath, folks.

Sudan, Egypt to talk GERD, Halayeb today: Foreign Minister Sameh Shoukry is meeting his Sudanese counterpart, Al Dirdiri Al Dhikheri, in Cairo today to follow up on tripartite talks over the Grand Ethiopian Renaissance Dam (GERD), Al Ahram reports. Egypt, Sudan, and Ethiopia had taken a step towards breaking the months-long deadlock in negotiations over the dam during a meeting in Addis Ababa earlier this month. Shoukry and Al Dhikheri are expected to look into the next steps in GERD talks ahead of an upcoming trilateral meeting in Cairo on 18 and 19 June. You can expect Sudan to raise its claim to Halayeb during the meeting: Al Dhikheri had told Sudan’s parliament that Khartoum is planning to resolve all of its border disputes. But again, don’t hold your breath.

Ibrahim Mahlab is representing Egypt at a Libya-focused conference in Paris today. The gathering will bring rival factions together to agree on a political roadmap, according to a Foreign Ministry statement. Mahlab, the president’s advisor for national projects, will be among officials from 19 countries present for the meeting. Others include the UAE, Qatar, Turkey, and Italy. President Abdel Fattah El Sisi and French Foreign Minister Jean-Yves Le Drian had agreed in Cairo last month that they would push for the war-torn country to hold elections by year’s end.

Our friends at AmCham are holding their annual general meeting and iftar today. Their guest speaker will be Education Minister Tarek Shawki, who will speak about the government’s “national strategy for education transformation in Egypt.” We don’t know Tarek Shawki, but the man is brave to push for sweeping education reform — he deserves our support. Members and their guests and register here to attend the iftar and AGM.

Once again, Mohamed El Erian is the voice of reason. Writing on the Emerging Markets Zombie Apocalypse in a column for the FT, our favourite Egyptian abroad notes that “emerging markets are at it again. Having attracted plenty of money, they have been going through one of their periodic downturns marked by sharp price losses, negative headlines and even anxiety among some specialist EM investors.” But EM investors shouldn’t be spooked, he suggests: So-called “crossover investors” are running for the exits because that’s what they always do: Flee at the first sign of risk. Given that they’re much larger than most EM-focused managers, the cross-overs have an outsized effect on even large emerging markets. The key is keep faith and look for substantial opportunities amid the storm by drilling deeper into the unique “opportunities offered by different countries, securities and currencies.” READ: Emerging markets turmoil can be navigated profitably.

Goldman Sachs isn’t phased by Saudi Arabia and Russia’s plan to ramp up oil production, saying it will have a minimal impact on the upward trajectory of oil prices. Even an output hike of 1 mn bbl/d would only offset involuntary production declines, according to a research note by the bank picked up by Bloomberg. Goldman has been an oil bull since last year, believing that growing demand and the need for OPEC to see prices go up will make it the dominant trend.

Your Ramadan rundown for today:

Bank hours run 09:30 am to 01:30 pm for customers and from 09:00 am to 02:00 pm for employees, CBE announced.

The EGX is running shorter trading hours. The trading session kicks off at 10:00 am, but closes at 1:30 pm. Tap or click here for the full schedule.

We’re looking at reasonably good weather for the rest of the week, with the mercury set to hover between 32°C and 34°C all the way through Friday. A spell of warmer weather is on the horizon starting Saturday, according to the long-range forecast on our favorite weather app.

So, when do we eat? For those of us observing, Maghrib is at 6:50 pm CLT today. You’ll have until 3:12 am tomorrow to finish your sohour.

Four pieces of recommended Ramadan reading for that hour before iftar:

On creating wealth:

Entrepreneurs are driving a hard bargain with their investors. “Founders of highflying startups are increasingly wresting control of their companies from venture-capital backers and extracting huge pay packages tied to going public,” the Wall Street Journal writes. Faced with competition from mutual funds, sovereign wealth funds and others, VCs have less leverage than before, leaving room for founders to demand special voting shares, governance rights and other tools. (Read)

Souq rival Jumia is getting plenty of love in the Wall Street Journal,which highlights an investment by Goldman Sachs and other “big-name investors.” There are plenty of lessons in the piece for Egyptian entrepreneurs who want to grow by serving a mass audience — whether you’re a startup or own an established business. (Read)

On preserving wealth:

Never mind the mn;’aires: Here’s advice from bn’aires. Bloomberg columnist Barry Ritzholtz distills business and life lessons from the multiple bn’aires he’s spent time with over the years. (Read)

Family offices are becoming a ‘thing.’ The latest to get in on the action is Carlyle founder and former CEO David Rubenstein. Bloomberg takes a quick look at his Declaration Capital in a piece that has been shot into our inbox by multiple readers in the past couple of days. (Read)

Before we move on: The EGX has named a number of our friends to its Sustainability Advisory Committee. CIB’s Amal El Araby (sustainable development manager), EFG Hermes’ Hanaa Helmy (CEO of the EFG Hermes Foundation and head of CSR) and Qalaa Holdings’ Ghada Hammouda (chief marketing and sustainability officer) are now members of the committee, according to a statement from the EGX.

President Abdel Fattah El Sisi will be sworn in for his second presidential term on Saturday, 2 June, at the House of Representatives, Ahram Gate reports.

Afreximbank is hosting a conference on deepening Egypt-Africa Trade this Thursday, 31 May. The event is a precursor to the Afreximbank-backed Intra-African Trade Fair, set to run in Cairo from 11-18 December. To attend Thursday’s conference, check the event’s Facebook page here.

Do you have an idea for a tech-enabled business idea that could make agriculture in Egypt more efficient? The World Bank may have seed funding, access to mentorship, and an accelerator / incubator program for you through its “DigitalAG4Egypt” program. The deadline for submissions is 1 July. Tap or click here for more information.

Upcoming milestones to watch on our march toward becoming a regional energy hub:

• We could sign the contracts for our USD 60-70 mn grid connection project with Sudan in two weeks’ time, Egyptian Electricity Head Gaber El Desouky had told us. Eight local and global players have been invited to participate in the prospective tender to develop the project;
• Talks with Cyprus and Greece on a USD 4 bn interconnection project will kickstart within the coming month when a Cypriot delegation visits;
• Contracts for an interconnection with Saudi Arabia could be signed by the end of June, sources say.

They’re still on hiatus. If we were them, we’d be in a konafa-induced food coma by now. But we work for a living, so…

REGULATION WATCH- EGX-listed companies could soon have to contend with short sellers. The Financial Regulatory Authority’s (FRA) board of directors has reportedly approved proposed amendments to the Capital Market Act’s executive regulations that govern short-selling, Youm7 reports. A committee of FRA consultants suggested that the amended regulations include provisions that allow brokerage and securities firms to offer short-selling. Details are scarce, but we’ve been expecting the amended executive regulations to the Capital Markets Act, which were set to be issued in late April or early May, to introduce mechanisms and rules for short-selling and short-term bonds, alongside a host of other financial instruments, such as sukuk and commodities and futures exchanges.

Daddy, what’s a short seller? To quote the 1985 television commercial, it’s a question a child might ask, but not a childish question. Think of it as making a wager that a share will decline in value. You borrow a share (from your broker, often via a long-term holder of a stock who lends it for a small fee), then sell it right away. You then wait for it to go down before buying it back and returning it to its rightful owner, pocketing the difference between the price at which you sold and at which you bought the share back. The catch? Unlimited downside — and little control over the direction of the stock, unless you’re one of those shorts who uses public pressure to drive down a share price. There is a certain class of investor who loves to short, but it is pretty much the bane of listed companies everywhere.

This short video is probably the most to-the-point explainer we’ve seen on the subject (watch, runtime: 3:00).

INVESTMENT WATCH- EFG acquires four schools in EGP 1 bn transaction from TMG, GEMS tapped as operator: EFG Hermes acquired four national and British schools in Cairo’s suburbs from the Talaat Moustafa Group (TMG) in a transaction worth EGP 1 bn (USD 56 mn), according to a regulatory filing (pdf). Under the agreement, EFG Hermes’ merchant banking arm will provide capital for the project. The schools, which are located in TMG developments Rehab City and Madinaty, will be managed by Dubai-based operator GEMS Education, which recently entered a JV with EFG Hermes.

Background: EFG had announced last week that it was forming a 50/50 JV with GEMS to set up a new K-12 education platform in Egypt that would be funded by GEMS and an investment vehicle managed by EFG’s private equity division. The TMG transaction is part of the platform’s drive to invest c. USD 300 mn in Egypt’s education sector over the next five years. The company plans to acquire more than 30 schools and enroll as many as 40,000 students in them within that time frame, Private Equity Head Karim Moussa said yesterday, Reuters’ Arabic service reports.

GEMS as well has more in store for education in Egypt. The agreement with EFG Hermes and TMG is only a “first step” for the UAE company, which is open to other partnerships and investment opportunities in the country, board member Zulfe Ali tells Al Mal. GEMS should have more clarity on its Egypt strategy in six months’ time, he adds.

The UAE’s Dana Gas announced yesterday that it received USD 40 mn in payments from the Egyptian government, bringing total dues received so far in 2018 up to USD 88.8 mn. The funds will mostly be used to bolster Dana’s liquidity, allowing the company to pursue a number of projects in its pipeline, which include the development of the Balsam 8 well at its Nile Delta concession, as well as drilling its first offshore well in the Mediterranean north of Al Arish, which should start by early 2019. Dana Gas CEO Patrick Allman-Ward had previously said that his company would spend USD 47 mn in CAPEX in Egypt this year if the government follows through on its payments. Allman-Ward had met with Oil Minister Tarek El Molla last week to discuss the latest with the company’s ongoing projects in Egypt. Dana currently holds 14 development licenses, three concessions, and two treatment facilities in Egypt. EGPC’s payment could have been drawn from a USD 850 mn loan from a local banking consortium to repay international oil companies.

IPO WATCH- Eastern Company board agrees to list additional 4% on EGX under privatization program: Eastern Tobacco’s board has agreed to offer for sale an additional 4% of the company on the EGX under the state’s privatization program, Public Enterprises Minister Khaled Badawy said yesterday, Reuters reports. The Chemical Industries Holding Company (CIHC) had said in March that it would sell no more than 4% of its stake in Eastern Company. The move would ensure the CIHC retains a 51% stake, with 49% of the cancer-maker in free float. Proceeds from the sale will be retained by CIHC to fund the restructuring of other companies in its portfolio. The timeline for the transaction remains unclear. Eastern is likely to be among the first of 23 state-owned companies that will IPO or sell additional shares on the EGX starting as early as this summer.

DEMERGER WATCH- Spinoff from Arab Cotton Ginning Co. to start trading in two weeks’ time. EGX-listed Arab Cotton Ginning will spin off Arabia Asset Management and Development (AAMD) as a separate entity in two weeks’ time when AAMD starts to trade independently on the EGX, investor relations head Youssef Mohammady says. The demerger gives Arabia Cotton Ginning the core textiles business and spins off a land bank and other assets into AAMD. The Financial Regulatory Authority approved the demerger on Sunday, according to Mohammady; the General Authority for Freezones and Investment gave the green light to the transaction in January.

M&A WATCH- Arqaam Securities Brokerage completed Al Ahly Capital’s EGP 744 mn acquisition of 100% of the International Company for Livestock from its corporate parent, the National Bank of Egypt, according to Mubasher. The agreement will see Al Ahly Capital use the livestock company’s 600-feddan farm in Abu Rawash to establish an industrial project with initial investments of EGP 2 bn over the next three to four years. The company will finance the acquisition through the sale of parts of its stake in five state-owned companies under the state’s privatization program, including Sidi Kerir Petrochemicals, AMOC, and Abu Qir Fertilizers. Former CEO Khaled Badawi had said in December last year that Al Ahly Capital acquired the livestock company for EGP 1 bn, with plans to invest EGP 3 bn in the Abu Rawash industrial project.

Changing of the guard at the CPA is not as exciting as we had hoped: Consumer Protection Agency (CPA) head Rady Abdel Moty Ali gave his first interview since his appointment as the replacement of Atef “Smiley Face” Yakoub earlier this month. From his statements to Al Ahram, we sense that Yakoub will be present in spirit, as Ali repeated his predecessor’s zealous rhetoric on strong market regulation, with repeated references to “greedy merchants.” Yes, we know, we have to discount the rhetoric by at least 50% because it targets a mass audience, but still…

Some of his pronouncements have us a little perturbed. Most notable among them is the CPA’s attempt to turn us all into snitches, including by launching a Whatsapp number on which to receive complaints. The CPA’s strategy under his leadership appears to be (a) improve consumer awareness of their rights through media campaigns and (b) hire more inspectors and monitoring staff.

The silver lining: He never once mentioned price controls, a threat his predecessor had tossed around in the manner of a Roman emperor. The Consumer Protection Act, which Yakoub helped draft, put in place mechanisms to enforce price controls with approval from the Ismail Cabinet. The other positive we can make out is that the agency still needs to form a committee to hash out how the new act gets implemented, which will mean that enforcing the Consumer Protection Act may take longer than previously expected. The act, which passed the House of Representatives in April, is currently with President Abdel Fattah El Sisi to be signed into law, said Ali.

Artist Mohamed Fawzi Bakkar is hoping to keep the culture of puppet shows alive through the traditional art of marionette making. “The 32-year-old spends hours or even days designing puppets inspired by Egyptian life — farmers, street vendors, butchers and the occasional celebrity,” which he later uses to put on shows for adults and children alike, mostly during Ramadan, the Associated Press says.

It’s a blessedly slow news day for Egypt in the international press, with residual pickups of the so-called YouTube ban being the dominant narrative this morning. (The streaming video service is still up and running.)

A number of officials, members of parliament and pundits see a great economic opportunity in Egypt’s participation in the World Cup, writes Hani Sameer for Al Monitor. First and foremost in the eyes of government officials and MPs is the benefit it will bring for tourism. The Tourism Promotion Authority is launching a promotional campaign for Egypt during the World Cup, with billboards and screens showing advertisements for Egypt will be displayed on Russian streets and squares, and that commercials will run during matches. Sponsorship agreements will be also be another avenue to draw in foreign capital. Egypt plans to have an international tender for companies looking to manufacture kits for the Egyptian National team after the Egyptian FA was not satisfied with Adidas. Advertising and broadcasting revenues are also expected to see some spike during the event.

Other headlines which caught our eye this morning include:

• Remember Gehad El Haddad? Amnesty International issued a statement criticizing what it says are the “cruel, inhumane and unacceptable” conditions former Ikhwan mouthpiece Gehad el-Haddad faces in detention.
• Recent arrests of activists and journalists may be part of the government’s strategy to muzzle dissent ahead of a new wave of price hikes in July, Al Jazeera’s Natasha Ghoneim suggests.
• Cooperation with Dutch on water: An Egyptian delegation recently met with Dutch experts to discuss water issues in Egypt, including Integrated Coastal Zone Management, under a 2014 cooperation agenda, the Dutch Water Sector reports.

The best remedy for Egypt’s inactive political scene is merging like-minded political parties to create bigger, more active, and more visible entities, Hassan Abu Taleb writes for Al Ahram. The country has far too many parties, and none commands much popularity, Abu Taleb says, suggesting that the excess in choices is the culprit. He urges parties to pool their resources into fewer but more effective parties to revive Egyptian politics.

Recently enacted regulations requiring Saudi employers to rely on local talent rather than foreign labor is proving to be a curveball for many businesses, despite being intended to create more job openings for the locals, according to NPR. The regulations apply to several industries, including telecom and electronics retailers, which traditionally relied on South Asian workers to provide skilled and often cheaper labor. Many employers in these sectors now say that retaining Saudi workers isn’t panning out, mostly because of the culture that makes natives of the kingdom see these jobs as lowly and would rather work behind a desk in a government office. Some businesses continue to hire foreign workers, but are forced to pay the government a USD 80-107 fee for each worker, while other small and medium businesses have gone belly-up as a result of the regulations.

Muslims in Iceland experience one of the world’s longest Ramadan fasts, lasting for over 20 hours, particularly during this time of year, according to a BBC report. How do they cope with it? “If you believe in something, you are down for it,” says one Muslim resident of the capital Reykjavik. Additionally, not all of the roughly 1,000 Muslims living in Iceland refrain from food and drink for over 20 hours a day. Mansoor, the Imam of a small Muslim community in Reykjavik, leads a congregation that shortens its fasting hours to 18. “God wants to create ease for you,” he says, citing the Quran (watch, runtime: 03:14).

SMART PEOPLE WANTED. We’re hiring at both Enterprise and at our parent company, Inktank. We’re looking for critical thinkers who have outstanding English-language writing skills. Don’t apply if you are not (at an absolute minimum) unafraid of numbers. We offer a great, casual work environment, the opportunity to work with smart people who care about what they do, and plenty of intellectual challenge. You’ll do your best work here, whatever your profession is. Check out the open positions, from creative director to reporter, from Enterprise editor to senior investor relations advisor at Inktank.

Egypt’s butane production increased to 466k tonnes in 1Q2018, up from 436.7k tonnes during the comparable period last year, an unnamed EGAS source says. Egypt also imported 731k tonnes of butane during the quarter. Butane consumption in 1Q2018 reached 1.11 mn tonnes, down from 1.15 mn tonnes in 1Q2017. Growing Egypt’s refining capacity has been a cornerstone of the Oil Ministry, which is looking to reduce its reliance on foreign fuel and better improve fuel quality at home.

The French Development Agency will reportedly be providing a EUR 50 mn and EGP 485 mn loan to fund development work at the East Alexandria water treatment station. An alliance between Arab Contractors and French waste management company SUEZ signed an agreement with the Holding Company for Water and Wastewater yesterday to upgrade the station’s biogas production capacity, said water company official Hassan El Far. The project, which should take around two years to complete.

The Agricultural Ministry is reportedly considering resuming cotton imports from Côte d’Ivoire, Senegal, Mali and Chad, according to Cotton Exporters Association Head Nabil Al Santaricy, Al Mal reports.

The Egyptian Swedish Welding Electrode Company (ESWECO) is planning to invest EGP 450 mn to launch 18 new production lines by 2019, as it looks to increase annual production capacity to 15k tonnes, according to the company’s CEO Yasser Ibrahim.

China’s Foxconn Group met with executives from the Arab Organization for Industry (AOI) yesterday to discuss a potential collaboration to locally manufacture tablet devices for the Education Ministry ahead of the 2018-19 academic year, Al Shorouk reports. Education Minister Tarek Shawky had unveiled a plan last month to overhaul Egypt’s K-12 education system, that would, among other things, introduce electronic exams that students would take via tablets provided to them by the state. The minister had said the first batch of tablets, which would be produced locally by the ICT and military production ministries, is expected to cost around EGP 2.5-3 bn.

(EgyptAir is adding 12 weekly flights from Cairo to Russia to cope with increased air traffic during the World Cup next month, EgyptAir CEO and Chairman Safwat Musallam said, according to Al Shorouk. The national flag carrier could add more flights to its roster if there is further demand.

ECO Integrated Industrial Solutions is planning to invest EGP 12 mn next year to upgrade its recycling plant in 15 May City, CEO Essam Hashem tells Al Mal. The company, which also has plans to expand abroad, recently received approval from the General Authority for Freezones and Investors to launch its e-waste recycling startup Dr WEEE, which offers to collect e-waste from homes. ECO is also planning to begin manufacturing metals extracted from recycled e-waste within two years.

Yes, we all love Mo Salah. But we cannot export our brand of overzealous litigation. An Egyptian lawyer wants Real Madrid’s Sergio Ramos to pay EUR 1 bn for injuring Mohamed Salah during the Champions League final game on Saturday, Sports Illustrated reports. The lawyer, Bassem Wahba, says that, in addition to physically injuring the Liverpool striker, Ramos is responsible for inflicting “psychological harm” on the Egyptian people. Let’s just say that the likelihood of Wahba winning this lawsuit is around the same as Egypt’s national team getting anywhere in the World Cup without Mo Salah.

Egypt’s national taekwondo players Nour Hussein and Mohamed Ayman clinched two gold medals each on Monday at the 2018 Austrian Open Taekwondo Championship, Al Mal reports. Radwa Reda, Seif Eissa, Rawan Refaei, Mohamed Farag and Abdelrahman Wael bagged a bronze each.

Bitcoin Zakat? A mosque in London has begun accepting donations in bitcoin and other cryptocurrencies during Ramadan “in a bid to widen its donor base and cut down on currency conversion fees,” according to Reuters. The move comes despite Egypt’s mufti issuing a fatwa (religious edict) that using bitcoin contravenes Islamic law, but the mosque’s imam says that the mosque will not engage in trading the cryptocurrency.

Our friends at SODIC held their annual Iftar at Bab El Nile tent at Fairmont Nile City, where Managing Director Maguid Sherif spoke on the company’s operations to the press, the company said in a press release (pdf).