Thursday, 11 October 2018

No tax hike for the coming four years, Maait promises

TL;DR

What We’re Tracking Today

We’re nearly ready for the weekend. We just need to begin discharging our email debt to all those of you who wrote us in response to our announcement of Enterprise One, our forthcoming professional-grade business intelligence service focusing on actionable insights into our market. Beta partners will start hearing from us on Sunday.

Do you know what would make it easier for us to email the 100 of you we’re inviting to become beta partners? Internet. We have now been more than 36 hours without internet in the office. On a leased line. For which we pay a small fortune. It’s the sixth outage in two weeks. We can only imagine that our ISP’s Customer Service Baboon is genuinely pleased with him / herself.

You may now breathe. Market chatter earlier this week about the slump in the EGX sapping appetite among retail investors for IPOs appears to have been overblown: The retail component of consumer and structured finance player Sarwa Capital’s IPO was just over 30x oversubscribed at the close of the offer period yesterday, the company said in a statement (pdf). Sarwa’s shares start trading on 15 October. Reuters also has the story.

** #2 <rant>Egypt is about to lose once-in-a-generation opportunity. Car makers are turning North Africa into a global hub for the automotive industry, exporting parts and manufacturing cars that are sold across the region, in Africa and into Europe, the Wall Street Journal reports. The problem? By “North Africa” the Journal means Morocco and Algeria, because legislative foot-dragging means Egypt has no auto manufacturing industry to speak of. (Sorry, superfans: The 128 may be eternal, but the zombie car company known El Nasr does not count as manufacturing.)

Bns in investment have poured in to build the “world’s newest car-manufacturing cluster,” with Volkswagen, Renault, Peugeot, Hyundai and Toyota joining the party.

Why? The size of the opportunity. “The Middle East and Africa are expected to have 90 million vehicles on the road by 2040, up from 59 million today, according to OPEC forecasts.”

Egypt’s share of all of this investment? Zero.

The facts speak for themselves:

  • Morocco will soon make more cars every year than Italy and has overtaken South Africa as Africa’s manufacturing hub thanks to pro-manufacturing policies enacted Morocco;
  • Moroccan part manufacturers are major suppliers to the European factories of global car companies such as Ford;
  • Volkswagen is building an assembly plant in Relizane, Algeria, that’s making the Caddy delivery van and Polo compact — and has also opened factories in Kenya and Rwanda, with plans to build assembly facilities in Nigeria and Ghana;
  • SEAT is producing its Ibiza and Arona models in Algeria, and Skoda is doing its Octavia sedan;
  • Renault has built two assembly plants in Morocco over the past five years that produce more than 200k cars a year;
  • A new Peugeot plant in Morocco will come online later this year;

How did this happen? Governments took the lead. “Local governments eager to attract foreign investment…are adopting business-friendly policies such as relaxing currency controls, creating free-trade zones and providing financial incentives. Some are also building or expanding roads, rail links and deep sea ports,” the Journal writes.

We had a measure on the drawing board that could have attracted global investment — the so-called Automotive Directive that would have given tax and other incentives to assemblers of global brands if they went further up the value chain into manufacturing. Doing so would have given them a measure of protection against European Union imports on which customs duties will fall to zero at the start of 2019, and Trade Minister Amr Nassar has made clear that Egypt will not seek a delay in the customs cut. That initiative is stalled, and no one seems to understand why. We’ve spoken with industry and government insiders about the topic for more than a year now. The auto directive, which we reported this summer could be watered down, was due before the House of Representatives at the legislative session that began this month. As of this week, none of our sources know where the automotive directive stands

Our inaction may not be Angela Merkel’s fault. We had previously reported that opposition to the automotive directive from EU partners including Germany may have been part of the reason the bill — which is as unpopular with importers as it is popular with assemblers — has been stalled. Not so, says one of our sources with first-hand knowledge of the matter. The source claims a draft has been shopped around to various constituencies in the EU and has not run into serious opposition. </rant>

It could be a tough day for the EGX, and the Emerging Markets Zombie Apocalypse isn’t at fault (for once). A sell-off in US markets yesterday spread this morning to Asia, auguring poorly for European and regional markets when they open later today. Tokyo, Shanghai and Hong Kong were all down 2% or more at dispatch time this morning after the “deepest one-day selloff” in Wall Street stocks in eight months left some analysts musing about a potential correction. “With traders spooked by rising U.S. Treasury yields and fears of a deepening U.S.-China trade conflict, the benchmark S&P 500 index on Wednesday dropped 3.29%, its worst one-day decline since February, bringing its loss to almost 5.0% since closing at a record high on Sept 20,” Reuters reported.

Correction vs. bear market: A 10% dip from a high is generally seen as a correction; 20% down and you’re in bear territory. CNBC and Bloomberg have the story, which was the lead piece on the Financial Times’ web edition at dispatch time.

Factoid of the morning: Nearly USD 2 bn. That’s the value of outflows on Tuesday from BlackRock’s flagship debt ETF, a record one-day withdrawal for “the biggest exchange-traded bond fund…after the global fixed-income market saw more than USD 900 bn evaporate in last week’s Treasury-led bond rout, the FT reports.

In miscellany to see you into the weekend:

Reid Hoffman just made us want to puke. The LinkedIn founder’s advice on how to build a business: “If your start-up’s running smoothly, you’re not growing fast enough. In my new book #Blitzscaling, you will learn how embracing chaos and being the first to scale is the best way to achieve long-term positive impact,” he tweets. You can visit his book’s website here if your inner scenester feels neglected. Or save yourself the click and invest it in the hard work of building a real business. They’re just as dogmatic as Hoffman, but we’re solidly team Basecamp on this one. Go read It doesn’t have to be crazy at work by Jason Fried and David Heinemeier Hansson instead.

Cum what? Your (alleged) white-collar crime caper of the week: How two guys, one of them now parked in Dubai, reportedly used cum-ex trades to make off with USD 2 bn from Denmark’s version of the Tax Authority. It may even have been legal. (New York Times)

Google fan? Business Insider has a six-minute rundown of everything that took place at Google’s Pixel 3 event this week, while the New York Times writes that “new Pixel phones and other gadgets keep Google in the hardware hunt.”

PSA- Work in Smart Village, but live in Tagamoa? You may want to leave work a bit early today, and your Sunday commute could…be sub-optimal: Parts of the Ring Road between New Cairo and the Moneeb Bridge will be closed from noon today through 5pm Sunday for construction work on a footbridge near the Autostrad, Youm7 reports.

Enterprise+: Last Night’s Talk Shows

It was a surprisingly quiet night on the airwaves, with Hona Al Asema off the air and Lamees Al Hadidi still MIA.

The Agriculture Ministry will be issuing smart cards to farmers as of next month, which they will be able to use to acquire fertilizers, seeds, as well as diesel fuel, cabinet spokesperson Nader Saad told Yahduth fi Masr. The new cards will also allow farmers to collect amounts they’re owed on government contracts. The system will be implemented first in five governorates and expanded gradually over the course of six months to cover the rest of the country. Farmers can apply with their national ID cards at Agriculture Ministry offices (watch, runtime: 9:45).

The cards will replace farmers’ paper-based documentation, which will no longer be in service once the system is fully implemented, Agriculture Minister Ezz El Din Abu Setet told Masaa DMC. The ministry has collected data for 2.4 mn cards so far and expects to issue as much as 6.5 mn by the end of the six-month period, he added, noting that the move is part of wider efforts to transition to a paperless economy (watch, runtime: 20:59). We had heard back in March that the government was considering issuing smart cards for farmers with the aim of better tracking shipments earmarked for exports by issuing serial numbers that will serve as identifiers for different farmers’ products.

Separately, the Agriculture Ministry is looking for a loan to purchase excess cotton from farmers. The ministry is in talks with local banks for a loan with no more than a 12% interest rate to help the Spinning and Weaving Company purchase cotton from farmers, who were left with a problem of oversupply after private buyers withdrew from agreements they had signed earlier (watch, runtime: 20:59)

Egypt-Cyprus-Greece summit: The summit between the leaders of Egypt, Greece, and Cyprus in Crete yesterday got some air time on Yahduth fi Masr, which hosted political science professor Tarek Fahmy to talk about the political impact of the new regional alliance, which we also get into in the Speed Round, below (watch, runtime: 3:06).

Al Hayah Al Youm will be back Sunday, 14 October with Lobna Assal and Khaled Abu Bakr will be co-hosting, according to Youm7.

The Oksh is also making a comeback. We’re hearing that Tawfik Okasha will be on the air from Saturday-Thursday on Al Hayah TV to talk about…well, who knows, really? Need we remind you that Okasha, a former House rep. who was given the boot, recently won an appeal against a one-year prison sentence, which he received for faking his PhD.

Speed Round

Speed Round is presented in association with

** #1 EXCLUSIVE- In their own words: Maait, Kouchouk discuss debt control, tax reform, bonds with investors. We had exclusive access yesterday to an EFG Hermes investor call during which Finance Minister Mohamed Maait and Vice Minister of Finance Ahmed Kouchouk spoke on everything from debt control to tax reform and bond issuances. The two are currently on nondeal roadshow in Asia, timed to coincide with the IMF and World Bank annual meetings in Bali, for an upcoming USD 5 bn eurobond issuance. More than 400 participants joined the call, including equity and fixed-income investors and corporations with an interest in Egypt. Highlights of the discussion:

Ambitious targets of the debt control strategy: The Madbouly Cabinet’s debt control strategy was the major topic of discussion. Maait said it aims to bring Egypt’s debt level to 72% of GDP by FY2021-22, down from a current 92%. It also aims to bring debt service levels down to below 20% of GDP from a current 38%. The ministry hopes to achieve this, in part, through the introduction of a cap on foreign borrowing of 27% of GDP by 2022, said Kouchouk. Foreign borrowing had reached 37.2% of GDP in FY2017-18, he noted. The two said President Abdel Fattah El Sisi will likely sign off on the policy in the coming two weeks.

Selling bonds in a debt-control environment: One of the key planks of the debt strategy is to diversify sources of funding by tapping new markets, Kouchouk noted — hence the current roadshow’s focus on Asian markets. Egypt plans to go forward with the USD 5 bn eurobond issuance in early next year, noted Maait. Finance Ministry sources had told us on Tuesday that the ministry intends to sell some USD 20 bn through foreign currency-denominated bonds through to 2022.

As for domestic issuances, Kouchouk said the focus will be on longer-tenor bonds starting from this year. He noted that this is already underway, with issuances in the first quarter of the state’s 2018-19 fiscal year already approaching the total number of issuances that took place in FY2017-18. The ministry had been forced to cancel four bond auctions in September as yields rose significantly.

Foreigners held USD 14 bn in Egyptian debt as of the end of September, Kouchouk said.

Strong appetite on the roadshow signals investors don’t think Egypt is vulnerable to “EM contagion”: The response from investors in South Korea during the roadshow was very encouraging and appetite appears strong for the eurobond issuance, said Maait. Investors are convinced that the Egyptian economy is resilient to the shocks of the emerging market selloff, he added.

Taxes will not rise for at least four years: Maait could not stress enough that the amendments to the tax code on which the ministry is currently working are procedural in nature and will not impact tax rates. Tax rates will be stable for the coming four years, he said, a policy promise in line with that made by his predecessor, Amr El-Garhy. The changes now being discussed aim to simplify or streamline procedures and to automate them wherever possible as part of an overhaul of the Tax Authority.

New industry incentives on the horizon? Maait revealed that the government is working on new legislation that would expedite the allocation of land to industry, but provided no further color. (We do know that making land available for industrial use is a top priority for the Industrial Development Authority, which plans to offer about 30 mn sqm of land for industrial purposes through 2020, up from 9.5 mn sqm in the period between 2007 and 2016.)

Budgetary impact of rising oil prices has been overblown: While rising oil prices have had a negative impact on the budget, it has apparently not been as pronounced as previously thought. The rising price of oil has seen the treasury overshoot its fuel budget for 1Q2018-19 by only EGP 1 bn, Maait stressed. Government sources speaking to the press (including us) have put the impact for the first quarter at EGP 10 bn, with some estimating the total impact for the fiscal year would be EGP 100 bn. Maait said the lower-than-expected results largely came from a decline in consumption of fuel, especially diesel, which have balanced out the price hikes. He also confirmed that the government was still considering reviving the fuel hedging strategy, but implied that no decision has been taken yet.

Current account deficit looks good but more needs to be done on FDI: The Q&A session saw the conversation shift focus slightly to Egypt’s current account deficit over the coming 13 months. Kouchouk effectively sees little but sunshine heading into the coming 13 months as the supergiant Zohr discovery and other natural gas fields ramp up production. Maait chimed in to say that savings from Zohr will amount to USD 150 mn a month and around USD 1.5-2 bn per annum. Kouchouk did note, however, that more needs to be done to improve foreign direct investment, which has consistently failed to meet targets. Egypt’s current account deficit narrowed by 58.6% y-o-y to USD 6 bn in FY2017-18, while FDI dipped to USD 7.7 bn, down from USD 7.9 bn the previous year, on a target of USD 10 bn.

** #3 Monthly, annual headline inflation accelerate in September: Annual headline inflation jumped to 16.0% in September, up from 14.2% in August, data from the central bank showed on Wednesday (pdf). Monthly headline inflation also rose last month, coming in at 2.5% against 1.8% the previous month. Annual core inflation, which does not account for volatile items such as food, dipped slightly to 8.6% in September, compared to 8.8% in August.

The accelerated inflation “reflects the continuation of massive increases in the prices of fruits and vegetables on a monthly basis, and, to a lesser extent, the … back to school season,” Pharos Holdings’ head of research, Radwa El-Swaify, tells Reuters. Inflation levels accelerated for a second time this year in August, after rising in June as a result of increases to the costs of fuel, power, and transportation as part of the government’s phase-out of subsidies.

What does this mean for interest rates? September’s inflation figures have “dashed hopes” the central bank will cut interest rates, particularly in light of the emerging markets sell-off, write Tarek El Tablawy and Ahmed Feteha for Bloomberg. “With inflation at such a level, it has now become almost certain that we won’t see rate cuts in 2018 or even the first quarter of 2019,” Pharos’ Mahmoud El Masry tells the business information service. El Masry also pointed to rising global oil prices and impending fuel subsidy cuts as risk factors for inflation. Allen Sandeep, head of research at Naeem Holdings, is not calling it just yet, telling Reuters that the outlook for interest rates could change based on October inflation figures.

** #4 EXCLUSIVE- IPO WATCH- Zulficar & Partners tapped as legal counsel on Eastern sale: Zulficar & Partners has been chosen to act as legal counsel to Eastern Company on the sale of a 4.5% stake in the state-owned tobacco maker, a source close to the transaction told Enterprise on Wednesday. The letter of engagement is signed and a kickoff meeting for the share sale took place yesterday, we’re told. ​​EFG Hermes signed on last week to quarterback the transaction, which is expected to take the form of an accelerated bookbuild. Public Enterprises Minister Hisham Tawfik had said on Monday that the stake sale is scheduled to take place sometime between 21-25 October. The win caps a good fall for our friends at Zulficar, who recently served as underwriter’s counsel on the IPO of leading private sector education player CIRA and as sell-side advisor to Suez Cement on the sale of subsidiary Helwan Cement’s white cement plant to Emaar Industries. A government source had told us last month that Matouk Bassiouny was the frontrunner to win the mandate. The source is no longer on our year-end card list.

** #5 M&A WATCH- SIDPEC looking to acquire local petrochemicals company: Sidi Kerir Petrochemicals’ (SIDPEC) is looking into potentially acquiring another Egyptian petrochemicals company, it said in a statement to the EGX (pdf). The statement provided no further detail on the transaction.

** #6 Four global investment firms are looking to finance Egypt and Cyprus’ USD 1 bn underwater gas pipeline, commercial affairs head at the Cypriot embassy in Israel, Sofronis Papageorgiou, tells Bloomberg. The four firms, whose names Papageorgiou declined to disclose, have requested a progress update from the Cypriot government on the Aphrodite natural gas field. The field will be connected to liquefaction plants in Egypt via the planned pipeline. Egypt and Cyprus had signed the agreement to construct the pipeline last month, but construction remains contingent on Nicosia’s talks with shareholders in the Aphrodite field, who are looking to revise their profit-sharing agreement with Cyprus. Israel and Cyprus are also working to resolve a border demarcation dispute over Aphrodite and a neighboring Israeli field. However, “everyone has a clear mandate from their governments to get this done by the end of the year,” Papageorgiou says.

This came as Egypt and Greece gave Cyprus their blessing to push forward with gas exploration plans in the EastMed, despite objections from Turkey. “We have clearly expressed our support for Cyprus in its efforts to capitalize on the sovereign rights deriving from International Law regarding (offshore deposits) and to make progress in their exploitation,” Greek Prime Minister Alexis Tsipras told the press yesterday, the Associated Press reports.

The leaders of Egypt, Greece, and Cyprus also agreed yesterday to establish an East Mediterranean Gas Forum, Ittihadiya said. The forum — which will be headquartered in Cairo — will include among its members all countries that produce and import EastMed gas and work to closely coordinate the region’s policies on gas exploration and management to guarantee the mutual benefits of all the parties involved.

The three also signed yesterday MoUs to boost cooperation on investment, SMEs, education, customs, and social security. The agreements were signed during a tripartite summit in Crete yesterday at which the leaders of Greece and Cyprus both expressed interest in projects in the new capital and the Suez Canal Economic Zone.

President Abdel Fattah El Sisi sat down withboth leaders separately on the sidelines of the summit for discussions that centered around energy cooperation, economic ties, and regional issues, according to a transcript of his remarks at a press conference later.

LEGISLATION WATCH- Council of State review paves way for changes to rules on margin trading, futures exchanges, more: The Council of State (Maglis El Dawla) has completed its review of proposed amendments to the executive regulations for the new Capital Markets Act and is sending them back to the Madbouly Cabinet for approval, Financial Regulatory Authority (FRA) head Mohamed Omran said yesterday. The regulations include provisions that govern the issuing of so-called “green” bonds, sukuks, margin trading, and futures exchanges. The EGX and FRA also agreed to come up with new licenses for brokerage firms to serve 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.

Moody’s upgrades its outlook on the Egyptian banking system to ‘positive’ from ‘stable.’ Structural reforms in Egypt have created an environment of “sustainable and inclusive growth” that has helped improve overall operating conditions for banks, the ratings agency said yesterday. Moody’s sees banks maintaining strong credit growth and profitability, as well as strong funding, liquidity, and loan profiles in the coming period. Supporting its vision are expectations that GDP growth levels will hit 5.5% in 2019, up from 4.2% in 2017,as economic conditions continue to improve as the result of ongoing reforms, “increased domestic private sector investment, large infrastructure projects, as well as higher exports,” Moody’s Assistant Vice President Melina Skouridou said.

Egypt’s state-owned debit card system takes a step forward: Banks partnering with African payments service provider Network International “are now fully integrated and certified to process transactions from the new Egyptian national payments scheme Meeza,” Network International said in a statement (pdf) yesterday. Meeza is the national debit card the central bank is rolling out by year’s end as part of its push on financial inclusion and a cashless society. A CBE official said last month that pensioners would be among the first to access state benefits through the cards, which would also be used to electronically deliver payments to civil servants and subsidy recipients.

Pharos Fund I climbs 11 spots on EIMA’s weekly rankings: Our friends at Pharos Holding announced yesterday that their open-ended equity fund Pharos Fund I has climbed 11 spots on the Egyptian Investment Management Association’s (EIMA) weekly rankings, placing it “amongst the top 15 equity funds in terms of y‐t‐d performance.” The improvement in the fund’s performance came amid a change of management at the AM division, Pharos COO Angus Blair said a press release (pdf). Meanwhile, Pharos Fund maintained its position at the lead of the EIMA’s monthly rankings for both August and September.

** #7 World Bank’s new “human capital index” sees Egypt’s productivity levels dropping; country ranks 104 out of 157: Egypt ranked 104 out of 157 on the World Bank’s newly-launched Human Capital Index (HCI). The index takes into consideration factors such as probability of survival to age 5, adult survival rates and expected and learning-adjusted years of school to measure the next generation’s level of productivity “compared to a benchmark of complete education and full health.” Egypt’s HCI score in 2017 was lower than the regional average but marginally higher than its income group. Research also found that even though children complete on average a total 11.1 years of schooling, the quality of local education reduces that time to around 6.3 actual years, when compared against the global benchmark.

Singapore, South Korea, Japan, Hong Kong, and Finland are the HCI’s top five performers, respectively, while Liberia, Mali, Niger, South Sudan, and Chad made up the bottom five. You can read the full report here (pdf) or check out the detailed brief on Egypt directly here (pdf).

MOVES- Xerox Egypt appointed Ehab Guindi (LinkedIn) as its new managing director, according to Al Mal. Guindi, who succeeds Mohamed Amer, had formerly been MD of Xerox Saudi and was most recently the assistant vice president of operations of the tech wing of Saudi-based Olayan Financing Corporation.

CLARIFICATION- We reported yesterday that Sony Mobile had recently tapped former Motorola Mobility regional sales lead Sherif Salem (LinkedIn) as its new country head for Egypt. Salem has in fact been on the job since last March. We apologize for the mix-up; the story has since been corrected on our website.

** WE’RE HIRING: We’re looking for smart, talented, and seasoned journalists and editors to join our team at Enterprise, which produces the newsletter you’re reading right now. We’re looking for people who can work on this product and help us launch exciting new stuff. Applicants should have serious English-language writing chops, a strong interest — and preferably some professional experience — in business journalism, and solid analytical skills. The ideal candidate for us is a native-level-writer of English with the ability to read and understand Arabic. We offer the chance to work in a unique and casual work environment that promises to be intellectually challenging and rewarding. If you’re interested, please submit your CV along with 2-3 writing samples and a solid cover letter telling us a bit about who you are and why you’re a good fit for our team. Please direct your applications to jobs@enterprisemea.com.

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Up Next

Egypt will reportedly select a manager for its new sovereign wealth fund “within days,” Planning Ministry sources tell Youm7. The executive regulations for the law governing the SWF should be with Cabinet for review by mid-October, our sources had told us.

Sphinx International Airport in Giza is slated for inauguration “in the coming weeks,” according to Youm7. Flights had initially been expected to begin landing at the new airport by the summer of 2018.

An IMF delegation is due in town mid-October for a review of Egypt’s progress on its reform program ahead of the disbursal of the fifth USD 2 bn tranche of the country’s extended fund facility.

President Abdel Fattah El Sisi is in Moscow next Wednesday, 17 October. Military cooperation is high on the agenda, Russia’s deputy foreign minister told TASS on Friday.

The House will convene for its first general assembly of the new session on 21 October.

The 2018 Narrative PR Summit will take place at the Four Seasons Nile Plaza on Sunday, 28 October.

Egypt, Tunisia, and Algeria will hold a meeting in Cairo later this month to discuss efforts to end the civil war in Libya, Xinhua reports. The meeting is part of “periodic consultations” to support Libya, with the last held in Algeria in May.

An Egyptian-Sudanese presidential summit is set to take place in Khartoum. The gathering has yet to be officially confirmed.

Image of the Day

Sudan and South Sudanese unite on a basketball court in Cairo in the College De La Sainte Famille church in Ramses, never minding the split back home, Reuters reports. The players — some from South Sudan, some from Sudan, others from elsewhere in Africa — gather at the spot at least twice a week.

Egypt in the News

Former President Mohamed Morsi’s youngest son, Abdullah, was released on bail after having been detained for questioning yesterday. Abdullah Morsi had told reporters last week that his father is imprisoned under poor conditions, a judicial source said, according to Reuters. Ahmed Morsi, Abdullah Morsi’s older brother, said security forces arrested Abdullah from the family house in a suburb on the outskirts of Cairo, saying he would be released later. The Associated Press also has the story.

Worth Watching

An English-language Toyota ad has gone viral in Egypt — and is being slammed for delivering the message that misogyny sells. The minute-long advert dubbed “Made For Men #MFM” has been viewed nearly 3 mn times, and the comments section is alive with debate over whether it’s blatantly sexist or is genuinely poking fun at guys. Judge yourself: watch, runtime: 1:06.

Diplomacy + Foreign Trade

SMEs Development Authority to sign EUR 15 mn loan with EIB end-October: The SMEs Development Authority is in the final stages of talks with the European Investment Bank (EIB) for a EUR 15 mn loan and expects to sign the agreement by the end of the month, the authority’s head of human and social development sector Medhat Massoud told Al Mal. The loan will be used to develop the infrastructure of the governorates of Giza, Alexandria, Port Said, Monofeya and Assiut over about two years, Massoud. The agency has just completed repaying a USD 200 mn World Bank loan it received in 2012.

Energy

Oyoun Moussa coal plant, ACWA’s Luxor power plant to go live in four years

Construction of Abu Dhabi’s Al Nowais Investments’ USD 4 bn coal power station in Oyoun Moussa and Saudi’s ACWA Power’s USD 2.2 bn power plant in Luxor should be complete in four years’ time, an unnamed source at the Electricity Ministry tells Amwal Al Ghad. The Electricity Ministry expects to finalize talks with Al Nowais over the final price of electricity generated from the plant, which have been ongoing for well over three years since the project was first announced. Talks between ACWA Power and the ministry over its 2.25 GW plant had previously stalled, ostensibly over the plant’s location. This came after a meeting between Prime Minister Mostafa Madbouly and ACWA Power CEO Paddy Padmanathan in Cairo yesterday, where they discussed recent developments on the projects, Youm7 says.

Africa Power wins contracts to build 10 solar-operated irrigation systems in Farafra

Solar energy company Africa Power has been awarded contracts to build 10 solar-operated irrigation systems in Farafra, CEO Ahmed Hamdy tells Al Mal. The EGP 25 mn project will be financed by an unnamed Kuwaiti investor as part of the 1.5 mn feddan project. The stations’ combined production capacity will reach 2 MW.

Egypt to fine Saudi’s Fas for delay in Benban solar energy project

The Egyptian Electric Utility & Consumer Protection Regulatory Agency (Egyptera) has decided to fine Fas Energy, a subsidiary of Saudi Arabia’s Al Hokair Group, for a delay in completing a 50 MW solar power plant in Benban under phase one of the feed-in tariff program, sources close to the matter said. The agency wants to fine Fas USD 35k per day of delay, to be paid retroactively as of August, until the project is completed. The agreement stipulates that the Saudi company must pay USD 700 per MW for each day the project is delayed. Fas sources reportedly said the project would be complete and connected to the national grid within two months and that it would pay the fines.

Health + Education

Samsung begins delivering educational tablets for 2018-19 academic year

Samsung Egypt has begun delivering to the Education Ministry batches of the tablets manufactured for schools to use in the 2018-19 academic year, reports. Samsung was awarded the contract to supply the tablets last month.

Real Estate + Housing

Hyde Park, Constec to build EGP 140 mn Hyde Park project in New Cairo

Hyde Park Developments inked a EGP 140 mn agreement with the Construction and Design Company (Constec) that will see the two companies work together to develop the Hyde Park Cluster 19 project in New Cairo, Constec GM Ashraf Abdel Hakam tells Al Mal. The project is expected to be completed in 18 months.

Tourism

Egypt hires int’l health consultancy group to inspect Hurghada hotels

The Tourism Ministry has contracted international consultancy group Preverisk to inspect health and safety conditions in Hurghada hotels and enforce quality standards, according to a Tourism Ministry statement picked up by Al Mal. The Spanish firm will offer a comprehensive strategy based on its evaluation and is also expected to help train hotel employees. The project’s first phase will only cover Hurghada resorts but is expected to expand to other tourist destinations. The decision comes nearly two months after an e-coli infection killed a British couple on holiday in Hurghada. Reuters also has the story.

New phase of charter flights incentive program to begin next month

The new phase of the charter flights incentive program will start next month and will last until April 2020, Tourism Minister Rania Al Mashat said, according to Youm7. The program — which will be re-evaluated every six months — offers payouts and fee exemptions to flights and tour operators that bring in a certain number of tourists. The current program, which was launched in 2015, expires this month.

Automotive + Transportation

Dershal to invest USD 53 mn in Egypt for local electric car assembling

The local distributor of China’s Dongfeng cars, Dershal, is planning to invest USD 53 mn to begin assembling electric cars in Egypt, Dershal Chairman Hassan El Dessouky said, Xinhua reports. No further details were provided, but Dershal had signed an agreement with the state-owned Egyptian Automotive Manufacturing Company in July to cooperate on the assembly of electric cars using Chinese technology. The value of the agreement was not disclosed but execs said that he project would produce 200 vehicles in its first year and gradually increase output to 10,000 cars by its fifth year.

Egypt, Sudan to begin railway connection project soon

Egypt and Sudan are due to begin working on a new 630 km railway line that would connect both countries as soon as feasibility and environmental impact studies conclude, Ahram Online reports. A Transport Ministry delegation was just in Khartoum to discuss the next steps on the project, which will take 36 months to complete, according to delegation head Mohamed Seliet. The project was first proposed in 2010 and was revived in recent talks between the two countries.

Banking + Finance

CIB to begin issuing Aman insurance certificates

CIB will start issuing Aman insurance CDs, pending approval from the central bank, Head of Actuarial Affairs at Misr Life Insurance, which is issuing the CDs in cooperation with CIB, Mohamed Mostafa told Amwal Al Ghad. The Financial Regulatory Authority (FRA) approved CIB’s request to issue the certificates yesterday, joining the National Bank of Egypt, Banque Misr, Banque du Caire and the Agricultural Bank of Egypt. The government said in August it will provide around 2.3 mn temporary and seasonal workers with Aman insurance CDs — an initiative launched by President Abdel Fattah El Sisi.

Beltone to cancel GDR program

Beltone Financial’s board of directors has decided to cancel its Global Depositary Receipt (GDR) program, provided they receive approval from the company’s general assembly, Beltone said in a statement to the EGX (pdf). The company will continue procedures to raise its capital by about EGP 1 bn, according to the statement.

Egypt Politics + Economics

FinMin agrees to exempt profits on fixed income investments from income tax

The Finance Ministry has agreed to exempt fixed income investors from paying a 2.5% income tax on the profits they make from their investments, member of the Financial Regulatory Authority’s (FRA) consultative committee, Essam Khalifa, tells Al Mal. According to Khalifa, the ministry’s decision grants the same exemption applied to profits from investment funds under the Income Tax Law. The move is meant to level the playing field between the two types of investments, which both involve debt instruments but only differ in the tenor of the debt.

On Your Way Out

The King Abdul Aziz Foundation for Research and Archives (Darah) published pictures of the first Saudi royal visit to Egypt back in 1946, according to Arab News. During King Abdul Aziz’s 13-day trip, he visited several cities and landmarks, including Al Azhar mosque, the Arab League and Alexandria.

The Market Yesterday

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Pharos Holding - http://www.pharosholding.com/

EGP / USD CBE market average: Buy 17.85 | Sell 17.95

EGP / USD at CIB: Buy 17.86 | Sell 17.96
EGP / USD at NBE: Buy 17.78 | Sell 17.88

EGX30 (Wednesday): 13,621 (+0.2%)
Turnover: EGP 702 mn (3% below the 90-day average)
EGX 30 year-to-date: -9.3%

THE MARKET ON WEDNESDAY: The EGX30 index ended Wednesday’s session up 0.2%. CIB, the index heaviest constituent ended up 0.8%. EGX30’s top performing constituents were Emaar Misr up 5.2%, Arab Cotton Ginning up 4.0%, Egyptian Resorts up 3.1%. Yesterday’s worst performing stocks were Palm Hills down 5.9%, AMOC down 2.6%, and Madinet Nasr Housing down 2.0%. The market turnover was EGP 702 mn, and foreign investors were the sole net buyers.

Foreigners: Net Long | EGP +72.8 mn
Regional: Net Short | EGP -62.4 mn
Domestic: Net Short | EGP -10.5 mn

Retail: 43.6% of total trades | 40.2% of buyers | 47.0% of sellers
Institutions: 56.4% of total trades | 59.8% of buyers | 53.0% of sellers

Foreign: 35.4% of total | 40.1% of buyers | 30.7% of sellers
Regional: 12.0% of total | 8.0% of buyers | 16.0% of sellers
Domestic: 52.6% of total | 51.9% of buyers | 53.3% of sellers


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PHAROS VIEW

Rises in fruit and vegetable prices are behind the rise in monthly headline inflation in September, says Pharos Holdings. The month-on-month increase in inflation is a “temporary one and seasonal, which happens occasionally when the agricultural crop is spoiled.” In this case, tomato and potato harvests were affected, pushing up their prices by 35% m-o-m and 18% m-o-m, respectively. Pharos sees the annual inflation rate accelerating to 15.7% in 2QFY2018-19 and 15.8% in 3Q18-19, from 13.9% in 1Q18-19 on the back of seasonal factors that affect highly volatile items. You can view the full report here (pdf).

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WTI: USD 73.12 (-2.45%)
Brent: USD 82.97 (-2.39%)

Natural Gas (Nymex, futures prices) USD 3.27 MMBtu, (+0.21%, Nov 2018)
Gold: USD 1,195.30 / troy ounce (+0.32%)

TASI: 7,834.79 (-0.88%) (YTD: +8.42%)
ADX: 5,014.53 (-0.12%) (YTD: +14.01%)
DFM: 2,810.63 (+1.18%) (YTD: -16.60%)
KSE Premier Market: 5,288.77 (-0.3%)
QE: 9,964.37 (+1.26%) (YTD: +16.91%)
MSM: 4,508.67 (-0.19%) (YTD: -11.58%)
BB: 1,320.80 (-0.26%) (YTD: -0.82%)

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Calendar

07-11 October (Sunday-Thursday): Egypt-Romania Business Council to meet in Bucharest.

08-14 October (Monday-Sunday): The IMF and World Bank annual meetings in Bali, Indonesia.

09-11 October (Tuesday-Thursday) Egypt Renewable Energy Conference, Cairo, Egypt.

Second week of October: NI Capital expected to select winning bid in its tender for the management of Alexandria Containers & Cargo Handling’s stake sale.

12 October (Friday) Egypt plays its third 2019 Africa Cup of Nations qualifier against Swaziland

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

Mid-October: IMF delegation due in town for its fourth review of Egypt’s economic reform program.

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.

28 October (Sunday): 2018 Narrative PR Summit, Four Seasons Nile Plaza, Cairo.

03-06 November (Saturday-Tuesday): World Youth Forum 2018, Maritim Jolie Ville Golf Course, Sharm El Sheikh, Egypt.

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

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

06-07 November (Tuesday-Wednesday): 2018 IIF MENA Financial Summit, Al Maryah Island, Abu Dhabi, United Arab Emirates

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

17-19 November (Saturday-Monday) ElectricX-Energizing the Industry, Egypt International Exhibition Center, Cairo, Egypt

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.

13-15 December (Thursday-Saturday): Forum on “The Role of Digital Financial Communication and Solutions in Enhancing Financial Inclusion,” Sharm El Sheik, 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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2018 Enterprise Ventures LLC.