Thursday, 6 September 2018

Is the CBE propping up the EGP?


What We’re Tracking Today

Sir Geoffrey Adams has been appointed as the UK’s new ambassador to Egypt, the British foreign office said yesterday. Adams was previously stationed in Cairo in 1998 as the head of mission, and also acted as the Foreign & Commonwealth Office’s director for the Middle East and North Africa. Masaa DMC’s Osama Kamal took the time to welcome Adams to Egypt last night, urging him to convey an accurate image of Egypt to the UK. Kamal lambasted outgoing ambassador John Casson for his “hostile” behavior towards Egypt and its citizens during his service (watch, runtime: 5:19). Yahduth fi Masr’s Sherif Amer also covered the news of Sir Geoffrey’s appointment (watch, runtime: 2:03).

Financing pact with the “other IFC” today” The ministries of supply and trade will sign a financing agreement with the Islamic Finance Corporation today, the Investment Ministry said in an emailed statement. No further details were provided.

Emerging market equities are back into bear territory as currency crises in Turkey and Argentina deepen and the pain spreads to other markets, the Financial Times says. The sell-off intensified yesterday, reflecting a broader direction by investors to curb exposure to EM assets, whether stocks, bonds, or currencies. “MSCI’s broad gauge of mid- and large-capitalisation EM equities dropped 1.6% on Wednesday, bringing the decline over the past half-dozen trading sessions to 4.4%,” the paper said. Wall Street futures also dropped yesterday, fueled by trade war concerns and signs that Chinese economic growth is slowing down.

It’s now the longest EM rout since 2008, writes Bloomberg, regardless of the asset class you’re talking about, suggesting that “not one of the seven biggest selloffs since the financial crisis — including the so-called taper tantrum — inflicted such pain for so long on the developing world.” With a “stampede of selling across emerging markets” now sweeping from Turkey and Argentina to South Africa, Brazil and Indonesia, the business information service says, “a cadre of investors and strategists from JPMorgan Chase & Co. to BlackRock Inc.” are all using the word “contagion.”

Why contagion? “The argument goes like this: while the asset class may offer value over the long haul, investors will sell relatively safe holdings to cover losses in more vulnerable markets or, worse, treat all emerging markets the same and sell indiscriminately. A herd mentality has taken over, meaning no matter what the relative risks and potential returns are in individual countries, investors who choose to buy run the risk of being trampled.”

Don’t expect a turnaround before early 2019, a Bloomberg Opinion author suggests in a muddled piece that’s getting social shares, but which is really trying to make the point that America is vulnerable, too.

The EGX30 was down 1.1% for the day. Among the stocks blunting the decline were QNB Alahli (+2.1%) and Qalaa Holdings (+1.8%), with the latter rising on news that it may hike its stake in subsidiary Egyptian Refining Company. We noted yesterday that Qalaa co-founder Hisham El Khazindar had suggested Qalaa could increase its exposure to ERC if the refiner were to go ahead with a capital increase. ERC, which is now 98% complete, is set to start trial operations this fall and is widely expected to have a transformative impact on Qalaa’s financials when it is fully operational next year.

In other news this morning:

Sukuk will rise in popularity long-term despite 1H2018 dip: Moody’s Investor Service expects sukuk issuances to grow in the long run, as governments continue to invest assets in a mix of traditional and Islamic financing tools. That is despite a 12% decrease in issuances to USD 55 bn in 1H2018. Issuances in the GCC led the drop in the first half of the year, but new programs in Saudi Arabia, Turkey, and Malaysia are supposed to drive market momentum for the rest of the year. Read the full report here in Arabic (pdf).

Members of The Donald’s cabinet have discussed removing him from office, a senior administration official writes anonymously in an op-ed for the New York Times that is making waves across the pond. Read I Am Part of the Resistance Inside the Trump Administration.

Other news worth noting with your first espresso of the day:

  • Emirates flight quarantined in NYC: An Emirates flight to New York from Dubai with more than 500 people aboard was quarantined on landing after as many as 100 people became ill during the flight with flu-like symptoms.
  • Blood testing firm Theranos is going to dissolve in the wake of a high-profile scandal prompted by reporting by the Wall Street Journal. If you haven’t already, read reporter John Carreyrou’s Bad Blood, his account of the takedown.
  • Instagram wants to get into e-commerce. The Facebook-owned company is building a standalone shopping app, The Verge reports.

We have a mid-week holiday coming up: The government has pencilled in Wednesday, 12 September as a national holiday in observance of Islamic New Year. Look for confirmation some time in the coming days, as a formal announcement has yet been made: The holiday could also fall on Tuesday, 11 September.

Enterprise+: Last Night’s Talk Shows

**#8 PSA- We are taking a break from our daily talk shows coverage next week to give our ears the chance to heal. We will resume our regular roundup of the airwaves on Sunday, 16 September. (And, yes, we’ll keep one eyeball on the TV set each night in the event something big were to break.)

Has Lamees Al Hadidi been axed? The Egyptian Media Group (EMG) has reportedly decided to take Lamees Al Hadidi’s show Hona Al Asema off the air after it acquired 100% of Future Media Group (FMG), which owns satellite news channel CBC, in a recent transaction. The details of the agreement will be announced soon, a reporter at CBC tells Al Mal. The story provides a plausible explanation to Lamees’ absence from the screen, even though she had announced on on Twitter last week that she was due back last Saturday.

Egypt signs 11 MoUs with Uzbekistan: President Abdel Fattah El Sisi’s visit to Uzbekistan earned much airtime on the airwaves. Egypt signed 11 MoUs with Uzbekistan covering cooperation in energy, agriculture, transportation, trade, manufacturing and industry, as well as political and cultural cooperation, according to an Ittihadiya statement. The two sides also agreed to establish an Uzbek-Egyptian business council,according to Central Asia’s Trends News Agency. El Sisi was in Uzbekistan for two days attend the Uzbek-Egyptian business forum and hold talks with Mirziyoyev (Read the full text of Sisi’s speech).

The trip is also significant as having been the first by an Egyptian president since Gamal Abdel Nasser, Bakhtiar Mohammed, a counselor at the Uzbek embassy in Cairo, told Al Hayah fi Masr (watch, runtime: 6:29). Yahduth fi Masr (watch, runtime: 1:35) and Masaa DMC also covered the visit(watch, runtime: 1:51). We have further details in Diplomacy + Foreign Trade, below.

Storms and heavy rains are expected to hit Upper Egypt today and tomorrow, but are not expected to cause flooding, meteorological authority head Ahmed Abdelaal told Al Hayah fi Masr (watch, runtime: 5:26). Abdelaal also spoke to Yahduth fi Masr, saying that autumn’s early arrival this year led the authority to begin taking steps to prepare for floods from now (watch, runtime: 3:45). We’re not sure how on earth the uncomfortable heat of the past week qualifies as “autumn,” but sure.

A campaign calling for the boycott of fruits and vegetables has driven down prices noticeably over the past two days, Mahmoud Askalani, the head of the Citizens Against High Prices Association — which routinely protests price increases in any commodity — claimed on Al Hayah fi Masr. Vendors were forced to slash prices as a drop in demand saw produce rotting on shelves, Al Askalani said (watch, runtime: 4:32).

Water us and measures to use flood and rain water for irrigation were the topic of the night in a talk between Irrigation Ministry official Osama Al Zaher and Al Hayah fi Masr’s Kamal Mady (watch, runtime: 5:53). Must-watch TV, to be certain.

Speed Round

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**#1 Is the central bank propping-up the EGP amid the ongoing emerging markets selloff? Capital Economics suggests in a report out yesterday that the central bank has “intervened to support the EGP in recent months.” The report points as evidence to the stability of the EGP throughout the emerging markets sell-off when compared to other currencies. The assessment comes despite past pledges by Governor Tarek Amer that the CBE is out of the business of managing the currency.

How much longer can it continue? While Egypt’s rising FX reserves and improving external position may allow the CBE more time to prop up the currency, the sting of the sell-off in EM assets may force it to abandon the policy. Egyptian assets have been strained as “foreign investors have been net sellers of Egyptian stocks over the past few months and also reduced their holdings of Egyptian government bonds, which has contributed to a fresh rise in bond yields.” Furthermore, the IMF is also likely to push the government to stop intervening in the currency market to keep it attractive to foreign investors, the report says.

But let’s keep this all in perspective: Capital Economics sees the EGP losing up to 10% of its value against the USD by 2020. The pound is seen as easing to 19-20 per greenback by then.

Once again, this is why we don’t see the central bank cutting interest rates soon. The CBE’s monetary policy committee meets at month’s end to decide on interest rates. We’ve previously championed rate cuts to kickstart private-sector borrowing, but now believe the MPC will leave rates on hold to ensure Egypt remains attractive to the carry trade in an environment in which other markets are taking. FX stability is on the keys to anyone looking at a carry trade, so…

Net FX reserves up: Preliminary data shows Egypt’s net foreign currency reserves climbing to USD 44.42 bn at the end of August, up from USD 44.3 bn at the end of July, the central bank announced yesterday.

**#2 Egypt’s economy would have grown much faster had it not been for external shocks including high oil prices, rising rates in the US, and a strengthening USD, Finance Minister Mohamed Maait tells CNBC in an interview (watch, runtime: 3:35). “We are able to absorb some of the shocks. Others have more of a negative effect,” he said, adding that there is a limit to how much Egypt can sustain. “Hopefully what is happening now will be corrected and we’ll move into a stable position.” Despite that, Egypt is “still on track,” with unemployment levels dropping, GDP growth rising, and the budget deficit narrowing, according to Maait.

Controlling public debt is also a top priority for the government, Maait added. The minister said on Monday that the government was working on a new policy package to bring debt levels down. Proposed measures, which will be announced within weeks, include caps on external and internal borrowing and further structural reform.

**#3 As the El Sisi administration maneuvers to reduce debt, state-owned banks pile up new foreign-currency loans loans: The National Bank of Egypt (NBE) has signed a USD 600 mn loan agreement with the China Development Bank to “finance the working capital of NBE customers,” the bank said on Wednesday, according to Reuters. The facility is the latest in a series of large debt packages taken by NBE that include raising some USD 600 mn in a club loan of international banks and a EUR 375 mn financing agreement with the European Investment Bank (EIB). The loans come as the government is making debt control a crucial pillar of its fiscal policy, with plans in the coming weeks to adopt a strategy to limit borrowing from foreign international institutions, limit bond issuances, and give the Finance Ministry a say in loan agreements that require it to extend a guarantee.

CABINET WATCH- Until it signs off on a debt control strategy, the Cabinet will make hay with new loans while the sun shine. Ministers approved a number of other decisions,including financing agreements with international lenders such as the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB). Those include:

  • Approving a EUR 395 mn agreement between the EIB and Housing Ministry to finance the first phase of sewage water treatment projects in Fayoum;
  • Signing off on a EUR 205 mn loan agreement with EBRD to finance infrastructure development for the Cairo Metro Line 1;
  • Signing off on a USD 500k grant from the UN’s Food and Agriculture Organization for projects on water conservation and production.

Streamlining procurement of government assets: The Madbouly Cabinet also approved a decision at its weekly meeting yesterday that makes the General Authority for Governmental Services the main agency responsible for the procurement of any assets or commodities for ministries and other agencies within its domain, such as cars, for example. The decision means to streamline state procurement procedures and aid in rationing expenditures, according to a cabinet statement.

Winter is coming, warns PM: Prime Minister Mostafa Madbouly ordered the Local Development Ministry to begin taking the necessary precautionary measures ahead of an expected spell of bad weather this winter, after the national weather service warned earlier this week that the third week of September may come with torrential downpours in the northern and southernmost corners of the country, as well as in the Sinai.

Egypt is taking steps to settle the USD 2 bn it has been ordered to pay Spanish-Italian JV Union Fenosa Gas (UGS) over gas supply interruptions at the Damietta liquefaction plant, the Oil Ministry said in a statement picked up by Reuters. (The Oil Ministry’s website was down at dispatch time.) Details on what the steps entail were not disclosed, but the statement is the first official line on the issue since the World Bank’s International Centre for Settlement of Investment Disputes issued the ruling earlier this week. Sources said the payments would be made in the form of new gas shipments. UGS — a joint venture between Spain’s Naturgy and Italy’s Eni — had filed the case against Egypt some years ago, complaining that the government had cut off flows to its Damietta liquefaction plant, of which it owns 80%. Sources said on Tuesday that the government was willing to resolve the dispute, as the move could expedite the resumption of LNG exports and help put Egypt on the map as a regional energy export hub.

Speaking of which, the Oil Ministry is reportedly planning to end its five-year contract for the Höegh Gallant FSRU in mid-September after a number of wells, including from Zohr, are connected to the grid, an EGAS source said. The decision comes as Egypt’s gas production is expected to reach 6.75 mcf/d by then, bringing us closer to a cessation of gas import tenders. The source noted that Egypt does plan to hold on to one FSRU should the need arise to import gas. It could also be converted to a floating liquefaction and storage unit (FLSU).

**#4 IPO WATCH- Carbon Holdings to sell 30% stake in 2Q2019 IPO: Carbon Holdings plans to sell a 30% stake in an IPO next year, Managing Director of Corporate Finance and Investor Relations Karim Helal said. The company also appears to have narrowed the date of the IPO to 2Q2019, according to Helal. The offering will include a global depository receipt program, he added. Helal had said back in May that company, founded by industrialist Basil El Baz, was looking to raise as much as USD 250 mn in the transaction, which was said at the time to be slated for 1H2019. Sources previously told us that the stake sale could be the largest in Egypt since 2011 and could value the company north of USD 1 bn.

This comes as Carbon Holdings is in talks with international lenders on the debt package for its USD 10.9 bn Tahrir Petrochemicals Corporation (TPC) complex, Helal said. Lenders include the European Bank for Reconstruction and Development, the International Finance Corporation and the African Development Bank. He expects to reach debt close before the end of the year.

Advisors: EFG Hermes is acting as advisor and global coordinator for the IPO, Baker & McKenzie is local legal counsel, and White & Case is international counsel.

IFC has appetite for state privatization program: The International Finance Corporation could have appetite for shares that could be offered as part of the state privatization’s reborn program, IFC Regional Director Mouayed Makhlouf tells Al Mal. Makhlouf did not offer further details on how much IFC could earmark for the process. He shrugged off concerns that the current turbulence in emerging markets would impact the privatization program, saying that foreign and regional investors have signaled a healthy appetite for Egyptian investments over the past several months and will likely ensure the success of the planned stake sales.

Careem reportedly exits Swvl: Careem has reportedly exited its stake in mass transit app Swvl, Al Mal claims, citing sources close to the transaction. The exit comes as Careem has begun rolling out its own bus hailing service last month, according to the source, who gave no further detail. Careem had bought an undisclosed stake in Swvl back in July 2017 for USD 500,000.

**#5 EFG concludes advisory on first IPO in Oman with DGC listing: EFG Hermes announced yesterday it had taken Oman-based Dhofar Generating Company public in a USD 52 mn transaction on the Muscat Securities Market. The offering, on which EFG acted as sole global coordinator and bookrunner, saw DGC shareholders offer 40% of the company at OMR 0.225 per share to a “diversified and healthy investor mix that goes beyond the pool of retail investors and local institutions,” according to an EFG press release (pdf). Bank Dhofar was issue manager for the sale. The transaction is EFG’s first of its kind in Oman and sixth equity capital market transaction this year, said our friend Mohamed Ebeid, co-CEO of the Investment Bank at EFG.

The government is already in talks with “at least” one bank over its planned wheat hedging program, an unnamed government official tells Bloomberg. According to the source, the plan to hedge against volatile global wheat prices is still “in the early stages,” but the news information service notes that introducing such a program would be “a dramatic development” in the global wheat market. If wheat prices stabilize at their current levels, Egypt would spend around USD 3 bn on purchasing the commodity this year alone, according to Bloomberg News estimates. Fees to insure the country’s wheat import needs are estimated at around USD 150 mn. Meanwhile, the wheat tender Egypt launched on Tuesday helped global wheat prices inch back up after prices had slid one day earlier on the back of Russia “playing down the possibility of export restrictions,” according to Reuters.

Background: We reported on Monday that the Finance Ministry is looking to initiate a program to hedge against volatility in global wheat prices in a manner similar to its fuel hedging program, as part of a series of initiatives announced by minister Mohamed Maait to keep fiscal spending under control.

**#6 REGULATION WATCH- Short-selling to be introduced early in 2019, not this month: Shorts will be on the menu for investors in early 2019, the Financial Regulatory Authority (FRA)’s deputy chairman told Reuters yesterday. The FRA will finalize the regulations governing shorts by the end of September and then spend a few months after that “training companies to implement the mechanism,” Khaled El Nashar said. “We will be ready for implementation in early 2019 and then wait for the official decision to activate the mechanism and start using it,” he said.

El Nashar says he was misquoted the previous day when a local newspaper broke news that shorts would be introduced to the EGX at the end of September. El Nashar had previously said that short-selling regs will be strict enough to ensure that only brokerages with the balance sheet strength would be given license to do so. The rules are expected to place limits on the number of shares a short-seller can borrow for a short position and also force borrowers to pay a cash security deposit equivalent to 50% of their borrowed stocks.

The FRA will get back to work on the regulations governing a potential futures market before the end of this year, FRA boss Mohamed Omra said in a statement yesterday. An FRA committee has already put together a first draft of the regs. We had heard last month that Egyptian investors could be trading futures before the end of 2018.

The EGX is set to see a new centralized order system come online in a few days’ time, EGX Chairman Mohamed Farid told Amwal Al Ghad. The new system, which is expected to simplify trading, will give the EGX the tools it needs to offer shorts and futures, among others. No further details were provided.

Background: Amendments to the executive regulations of the Capital Markets Act, which were issued in May, opened the door to the introduction of new financial instruments to the market, such as short-selling, futures and commodities exchanges, as well sukuk, green bonds, and margin trading. The FRA is also considering introducing regulations for licensing brokerage firms as market makers, which would allow them to both buy and sell securities from their own inventory at prices which they have a measure of control over. The tools are part of a four-year strategy to develop Egypt’s non-banking financial sector.

Factoring is all the rage: Egyptian financial services firms are looking to get into factoring (the world’s second-oldest profession?). Sarwa Capital, which is currently in the market with one of the fall’s most hotly anticipated IPOs, could start buying accounts receivable by 2019 as part of its expansion strategy, our friend Hazem Moussa tells Al Mal. Sarwa is also planning on focusing on SME financing in the coming period, Moussa said. AT Lease is also looking to get in on the act, offering factoring and setting up a specialized SMEs unit by 2022 as part of the company’s five-year expansion plan, CEO Tarek Fahmy tells the same newspaper.

And because every investment banker is really a consumer finance guy at heart (hello, stable revenues…), HC Securities is exploring whether to launch leasing services as part of a plans to expand its portfolio of non-banking financial services. EFG Hermes kicked off the trend of bankers getting into NBFS a few years back with the successful launch of its leasing franchise, setting off something of a gold rush. Separately, HC Deputy CEO Mohamed Metwally says the firm has a mandate for a healthcare IPO that could be worth as much as EGP 1.5 bn set for execution in 4Q2018 and is arranging EGP 4 bn in funding from a consortium of banks for a non-listed food and beverage company.

Oil and gas companies to pay real estate tax taxes based on field development costs: The ministries of oil and finance reached an agreement on Tuesday on the guidelines for the tax treatment of properties in oil, gas, and mining, according to a cabinet statement. For the oil and gas sector, a field’s cost of development will be used as a base to calculate its real estate taxes.

The real estate tax for mines, quarries, and salt lakes will be assessed based on the annual value of royalties that miners pay the government. The move means to bring real estate tax regulations in line with the 2008 real estate tax law, which stipulates that guidelines are set for the tax assessment of industrial and commercial properties in fields including tourism and oil and gas.

Background: We had previously heard that the real estate tax rate for oil and gas companies, which pay the highest corporate tax rate in the country, was set at 10% of a taxable base as defined by the Finance Ministry. That taxable base was set by a formula that factors in the book value of the field’s land and facilities, the period of time since the development of the field, and the average inflation rate over the past 10 years. The agreement is one step in the broad overhaul of the real estate tax formula led by the Finance Ministry, which is expected to affect businesses and private landowners alike. This new formula would set “clear and simplified” guidelines for the tax assessment of properties such as hotels, ports, and airports. The Tourism Ministry had come to a similar agreement last week on the tax treatment of hotels, which will be calculated based on a property’s nominal investment value.

High level of e-coli contamination found in Steigenberger Aqua Magic: Holiday-gate took another turn for the worse yesterday after Thomas Cook said it had found a high level of e-coli and staphylococcus bacteria at Steigenberger Aqua Magic Hotel in Hurghada, where UK couple John and Susan Cooper died last month, according to Reuters. The company said the poor hygiene standards it had discovered in independent tests were the likely cause of a rise in illness amongst its guests at the hotel. The tour operator did not explicitly say that this was cause of the couple’s death. “We continue to await the results of the investigation being conducted by the Egyptian authorities and are working closely with the Foreign and Commonwealth Office to ensure we prioritise the very best interests of the Cooper family,” Thomas Cook chief executive Peter Fankhauser said.

The story topped coverage of Egypt in the foreign press this morning, with the coverage being led by the UK tabloids. Bloomberg and the AP also have the story, giving it legs well beyond Blighty.


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Image of the Day

Four tunnels connecting the banks of the Suez Canal will be inaugurated on 6 October, says the National.

Egypt in the News

Apart from holiday-gate it was a pretty dead night in the foreign press. The most notable piece came from the Wall Street Journal, which alleges Egypt is intolerant of women who publicly discuss [redacted] harassment .

Worth Reading

A sudden boom in tourism to Antarctica could threaten the continent’s already fragile ecosystem and further worsen global warming, according to the Financial Times. The continent’s current status as an uninhabited natural reserve has piqued the interest of many, including wealthy travelers who have no qualms spending five figures to board ships that take them directly to Antarctica’s shores. A large part of the issue is that Antarctica has no government and nobody to monitor tourism activity on the ground, making accountability fickle. One ecologist “warns that proliferating cruise ships will run out of sites and will have to range farther, visiting penguins unaccustomed to humans. ‘Unhabituated penguins are much flightier, much more aggressive and vocal when approached by humans … and much more likely to simply abandon their nests when approached.’”

Rising tourism in the South Pole isn’t all bad, though: Scientists have not found any evidence of higher levels of stress hormones in penguins living in areas that see a high influx of tourists. “Researchers also benefit from data crowdsourced from cruise-ship passengers participating in citizen-science initiatives — recording water temperatures, turbidity and other indicators. Travellers returning from Antarctica are a constituency that generally favours conservation.”

Worth Watching

How to prepare for rising sea levels step #1 — learn to dine underwater: And one Norwegian restaurant plans to do it. Dubbed "Under,” the gourmet restaurant — designed to look like a periscope — will sit on the sea bed some five meters below the surface of Lindesnes, off the coast of southern Norway. The half-sunken restaurant’s building is designed by architectural firm Snøhetta, which previously worked on the Bibliotheca Alexandrina. A 36-foot panoramic underwater window at the site should give guests the enjoyable experience of interacting with the food they are about to eat (watch, runtime: 0:51). Cue Sebastian the Crab’s track.


**#7 When you can see through the EM Zombie Apocalypse to the fundamentals, it’s a great time to invest in Egypt. That’s the take-home message from global consultancy Simon-Kucher & Partners CEO Georg Tacke, who recently gave the green light to the opening of a shop here in Cairo — the firm’s 35th globally. We delved into why the firm launched its Egypt office, its views on the economy, and whether consultancies are eating the lunch of marketing firms. Edited excerpts:

Why Egypt? And why now? It must be said first that we are not new to Egypt, as we’ve been actively serving clients here in various industries for many years. As an expanding global firm, we’ve been eyeing an expansion into Africa for some time. And since a key feature of our strategy wherever we are is local knowhow, and we have a solid and experienced Egypt team, opening an office here was the next logical step. Our office in Cairo will be led by Martin Janzen and Sara Shenouda — two financial services experts who have been spearheading a local team of specialists entrenched in a variety of sectors. The Cairo office has also full access to our global expertise across all industries from San Francisco to Shanghai.

This is an exciting time to be in Egypt. We’ve been following very closely the efforts the government has made to attract foreign investment and financial institutions through its ambitious reform agenda, particularly those reforms that have ensured the free and uninhibited movement of capital.

We see the inflation resulting from these reforms as not only temporary, but an opportunity. The question is, will the Egyptian market be ready when the dust finally settles? Are companies already preparing their products, services, prices, value proposition, business models, digital strategies, and their monetization to respond to this situation? We always tell our customers that there are those who make things happen, there are those who watch things happen, and there are those who wonder what happened.

We’re very excited about the financial services industry, which we see as still in its infancy in terms of its potential to grow. We like what the government is doing with the sector as well, particularly its financial inclusion initiatives and the potential growth of fintech and e-payments. These are all areas where we have much experience and knowledge to share. Our Cairo team is currently focusing on financial services, real estate, and tourism due to the growth potential we see in these industries. We’re also involved in telecommunications and energy, as well as consumer goods and retail. The mid-term plan is of course to cover all relevant industries in Egypt.

Our secret sauce is all about the power of topline: What distinguishes us from other consultancies is our adherence to what we like to call topline power. What we mean by that is essentially doing away with cost-cutting and restructuring, which we see as inherently limited and cumbersome. Instead, the focus is on growth, which is in principle limitless. We show our clients how to achieve it, through winning pricing, marketing, and sales strategies. If a company develops an innovative product or service, for example, we help to find the right price points and to come up with the best possible go-to-market strategy. We develop pragmatic and easy-to-implement solutions for our customers.

I cannot stress enough that we are a revenue-side consultancy. Our customers rely on us for this and we typically refrain from delving into the dreaded cost-cutting, including IT infrastructure development, automation, etc. We also strictly avoid legal advice and services.

And while marketing is a core component of our strategy, we do not see ourselves as a marketing and advertising agency. We are not worried about our industry being squeezed by such agencies. As a matter of fact, we see them as complementary to our business model. When it comes to marketing, Simon-Kucher & Partners helps its clients with the big picture: their segmentation strategies, marketing strategies, new product designs, portfolio optimization, value communication, marketing entry strategies etc. This is a totally different ball game from running ad campaigns, which we often hire out.

Typical challenges facing our customers in Egypt look to us for? First, our clients look to us to help develop the best digitization and online growth strategies catered to their business. They also come to us to help them know their customers better and what products adds value to them through customer segmentation with clear products differentiation and value communication. They also seek our expertise on how to adapt prices and revenue management, especially in the new currency and high inflation environment.

Diplomacy + Foreign Trade

EBRD, AfDB delegations due in town this month for talks on funding for Egypt: A delegation from the European Bank for Reconstruction and Development (EBRD) is due in Cairo on 23 September to discuss with Egyptian officials the bank’s financing strategy for the remainder of the year, Managing Director for the Southern and Eastern Mediterranean Janet Heckman tells Al Mal. EBRD is planning to extend EUR 800 mn of financing to Egypt before the year is out, Heckman tells the newspaper. The bank had already extended some EUR 600 mn of the EUR 1.4 bn it has earmarked for Egypt in 2018 as of June, Heckman previously said.

A delegation from the African Development Bank (AfDB) is also due in town “within days” to review its 2015-2019 cooperation strategy with Egypt, the bank’s country manager for Egypt Malinne Blomberg tells the newspaper. AfDB is reportedly planning to finance new energy, industrial, and agricultural projects in Egypt. The bank’s disbursal of the third and final USD 500 mn tranche of its USD 1.5 bn loan is also expected in the next few days, Blomberg said on Tuesday. Investment Minister Sahar Nasr had finished the paperwork for the final tranche back in January.


Organization for Standardization to enforce 400 new quality standards by year’s end

The Trade and Industry Ministry’s Organization for Standardization & Quality (EOS) is planning to enforce around 400 new quality standards across several industries before the year is out, EOS head Ashraf Afifi tells Amwal Al Ghad. EOS has already enforced 410 standards since the beginning of the year, according to Afifi. Meanwhile, the Trade and Industry Ministry is also looking to enforce this year a quality standard that would curb bribery and corruption across government and non-government bodies alike, according to Minister Amr Nassar.

Egypt Politics + Economics

Gov’t looking to conduct ambitious survey of the informal economy

State census agency CAPMAS is planning to undertake an extensive survey of Egypt’s informal economy in a bid to gauge exactly how big it actually is, according to a statement from Prime Minister Mostafa Madbouly at the Euromoney Conference, AMAY reports. The results will presumably inform the government’s policy to tackle the informal economy, the centerpiece of which is the SMEs Act.

Egypt wealth fund to initially focus on petrochem, tourism, pharma

Egypt sovereign wealth fund will focus its initial investments in the petrochemicals, pharma and tourism sectors for their high return rates, Planning Minister Hala El Said said at the Euromoney Conference on Wednesday, according to Al Mal. El Saeed added that a manager for the wealth fund will be chosen in the next three weeks. The government will appoint the board of directors for Egypt’s EGP 200 bn sovereign wealth fund within the coming few months, Finance Minister Mohamed Maait said on Tuesday.


Court upholds EGP 400 mn fine against beIN Sports for monopolistic practices

An Egyptian court has upheld a previous ruling imposing a EGP 400 mn fine on beIN Media Group officials, including Chairman Nasser El Khelaifi, for anti-competitive practices, Al Arabiya reports. The Egyptian Competition Authority (ECA) issued a statement (pdf) following the ruling calling on the Qatari television network to end its monopolistic practices. The ECA had referred beIN to prosecutors in January 2017 for monopolizing the distribution of world sports leagues by forcing viewers to subscribe to its entire basic package for a year as a condition of accessing the 2016 La Liga football tournament.

On Your Way Out

A snorkeling guide reportedly harassed a Russian tourist underwater while showing her around the coral reefs, another diver said on his Facebook page. The story, which has gone viral, is the latest several high profile harassment incidents lately, prompting Al Azhar to issue a statement condemning [redacted] harassment.

The Market Yesterday

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EGP / USD CBE market average: Buy 17.86 | Sell 17.96
Buy 17.86 | Sell 17.96
EGP / USD at NBE: Buy 17.78 | Sell 17.88

EGX30 (Wednesday): 15,751 (-1.1%)
Turnover: EGP 816 mn (0% below the 90-day average)
EGX 30 year-to-date: +4.9%

THE MARKET ON WEDNESDAY: The EGX30 ended Wednesday’s session down 1.1%. CIB, the index heaviest constituent ended down 1.0%. EGX30’s top performing constituents were QNB Alahli up 2.1%, Qalaa Holdings up 1.8%, and Sidi Kerir Petrochemicals up 0.8 %. Yesterday’s worst performing stocks were Egyptian Resorts down 3.7%, Heliopolis Housing down 3.4%, and Pioneers Holding down 3.1%. The market turnover was EGP 816 mn, and local investors were the sole net buyers.

Foreigners: Net Short | EGP -37.7 mn
Regional: Net Short | EGP -72.4 mn
Domestic: Net Long | EGP +110.0 mn

Retail: 55.9% of total trades | 55.6% of buyers | 56.3% of sellers
Institutions: 44.1% of total trades | 44.4% of buyers | 43.7% of sellers

Foreign: 20.7% of total | 18.4% of buyers | 23.0% of sellers
Regional: 9.0% of total | 4.5% of buyers | 13.4% of sellers
Domestic: 70.3% of total | 77.1% of buyers | 63.6% of sellers

WTI: USD 68.67 (-0.07%)
Brent: USD 77.27 (-1.15%)

Natural Gas (Nymex, futures prices) USD 2.79 MMBtu, (-0.11%, October 2018 contract)
Gold: USD 1,202.50 / troy ounce (+0.10%)

TASI: 7,719.10 (-3.13%) (YTD: +6.82%)
ADX: 4,972.92 (-1.12%) (YTD: +12.04%)
DFM: 2,818.44 (-0.66%) (YTD: -16.37%)
KSE Premier Market: 5,293.83 (+0.29%)
QE: 9,830.32 (+0.10%) (YTD: +15.33%)
MSM: 4,429.45 (+0.10%) (YTD: -13.34%)
BB: 1,335.26 (-0.24%) (YTD: +1.14%)

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10-13 September (Monday-Thursday): EFG Hermes’ 8th Annual London Conference, Emirates Arsenal Stadium, London.

11 September (Tuesday): Islamic New Year (TBC), national holiday.

16 September (Sunday): Creative Industry Summit 2018, Four Seasons Nile Plaza, Cairo.

17-19 September (Monday-Wednesday): INTERCEM Cairo to Cape Town cement industry conference, Dusit-Thani LakeView, Cairo.

18-21 September (Tuesday-Friday): The Big 5 Construct Egypt, Egypt International Exhibition Center, Cairo, Egypt.

18 September (Tuesday): Cairo Economic Court to issue ruling on EGP 5.6 bn antitrust case against pharma companies including Ibnsina.

20-23 September (Thursday-Sunday): 2018 Automech Formula car expo, Cairo International Convention Center, Nasr City, Cairo.

22 September (Saturday): New academic year begins for public schools, universities.

23-24 September (Sunday-Monday): Arab Security Conference on cyber security, Nile-Ritz Carlton, Cairo.

24-25 September (Monday-Tuesday): Arqaam Capital MENA Investors Conference 2018, Four Seasons Resorts, Dubai.

24-25 September (Monday-Tuesday): Egypt Water Desalination Forum, venue TBD.

26 September (Wedne sday): E-Commerce Summit, Nile-Ritz Carlton, Cairo.

27 September (Thursday): CBE’s Monetary Policy Committee meeting.

October: The Madbouly cabinet has until the end of the month to come up with a plan for “the development and restructuring” of public companies” under a directive from President Abdel Fattah El Sisi.

03 October (Wednesday): Egypt’s Emirates NBD PMI for September released.

06 October (Saturday): Armed Forces Day, national holiday.

12-14 October (Friday-Sunday): 2018 annual meetings of the World Bank and International Monetary Fund, Bali, Indonesia.

23 October (Tuesday): First Conference on Sukuk (Sharia-compliant bonds), Cairo.

23-24 October (Tuesday-Wednesday): Intelligent Cities Exhibition & Conference 2018, Fairmont Towers Heliopolis, Cairo.

24-25 October (Wednesday- Thursday) 9th Arab-German Energy Forum, Cairo, Egypt.

25-27 October (Thursday-Saturday): 57th ACI World Congress & 43rd ICA Annual Conference 2018, Four Seasons Nile Plaza, Cairo.

05 November (Monday): Egypt’s Emirates NBD PMI for October released.

05-07 November (Monday- Wednesday) World Travel Market London exhibition, London, England, UK.

15 November (Thursday): CBE’s Monetary Policy Committee meeting.

20 November (Tuesday): Prophet’s Birthday (TBC), national holiday.

22 November (Thursday): US Thanksgiving.

25-28 November (Sunday-Wednesday): 22nd Cairo ICT, Cairo Convention Center, Nasr City, Cairo.

03-05 December (Monday-Wednesday): First Egypt Defense Expo, Egyptian International Exhibition Center, Cairo.

04 December (Tuesday): Egypt’s Emirates NBD PMI for November released.

08-09 December (Saturday-Sunday): Business for Africa and the World: The Africa 2018 Forum, Maritim Jolie Ville International Congress Center, Sharm El Sheikh.

12 December (Wednesday): Banking and Finance Congress 2018, Cairo, venue TBD.

25 December (Tuesday): Western Christmas.

27 December (Thursday): CBE’s Monetary Policy Committee meeting.

01 January 2019 (Tuesday): New Year’s Day, national holiday.

07 January 2019 (Monday): Coptic Christmas.

22-25 January 2019 (Tuesday-Friday): World Economic Forum (WEF) Annual Meeting, Davos-Klosters, Switzerland.

23 January 2019 (Wednesday) 50th Cairo International Book Fair.

25 January 2019 (Friday): Police Day, national holiday.

20-22 April 2019 (Friday-Sunday): Spring meetings of the World Bank and International Monetary Fund, Washington, DC.

25 April 2019 (Thursday): Sinai Liberation day, national holiday.

28 April 2019 (Sunday): Easter Sunday, national holiday.

29 April 2019 (Monday): Easter Monday, national holiday.

01 May 2019 (Wednesday): Labor Day, national holiday.

06 May 2019 (Monday): First day of Ramadan (TBC).

05-06 June 2019 (Wednesday-Thursday): Eid El Fitr (TBC).

10-13 October 2019 (Tuesday-Sunday) Big Industrial Week Arabia 2019, Egypt International Exhibition Center.

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