Ousta collapse prompted watchdog to look at Uber, Careem merger

** #3 Wall Street went on a wild ride yesterday as investors “anticipate the end to a nine-year bull run” amid trade and tech fears: US equities closed lower again yesterday after the “wildest session since February’s plunge” the Financial Times says. Traders are “fleeing the shares that were the stronger performers earlier this year,” the WSJ adds. The S&P 500 swung more than 4% within the day (from high to low) before closing down 0.7%, while Nasdaq 100 “tumbled to its lowest level since May.” Both indexes “are on track for the steepest monthly declines of the record-long bull market.” The MSCI world equity index slid c. 0.7%, while China’s main index lost more than 3.3% at the end of trading yesterday, according to Reuters.

The EGX30 closed up 0.7% yesterday on slightly lighter turnover than the trailing 90-day average.

Fears of tech and trade are at play in the US sell-off as traders worried about the health of the nine-year bull run given “concerns about the global economy and a trade war with China as well as the outlook for technology companies and pace of interest rate rises.” Weighing heavily: A suggestion that the US could slap “all remaining Chinese imports” with additional tariffs if the two countries fail de-escalate tensions when President Donald Trump and his Chinese counterpart Xi Jinping meet next month in Buenos Aires. The new tariffs would be announced in December if talks prove unproductive, sources told Bloomberg.

Silver lining #1 (if you’re in Egypt): Oil took a little hit yesterday as concerns about the global economy sent Brent crude futures down USD 0.34 to USD 77.28 / bbl, Reuters reports. That’s good news for Egypt as the government starts projecting oil prices for the FY2019-20 budget. We have more on that subject in this morning’s Speed Round, below.

Silver lining #2 (if you think you can pick ‘em): Global stocks haven’t looked this cheap since 2016, the Wall Street Journal notes, pointing out that major indexes in Europe, Japan, China, Argentina and Canada are all “languishing in correction territory.”

How ugly do things look for EM right now? The Emerging Markets Zombie Apocalypse is still chewing on us all, whether you’re looking at flows or index performance. Have a look:

Know your rights: The EGX has put out a guide that pulls together all the rules and regulations protecting the rights of minority shareholders in companies listed on the bourse. You can download a copy in Arabic here (pdf) and in English here (pdf).

The UK is going to tax Big Tech. How long before we try this here in Egypt? Britain is going to introduce a “first-of-its-kind tax on locally generated revenue by large technology firms—the most concrete attempt yet by an industrialized nation to rewrite the world’s tax code for the digital era,” the Wall Street Journal writes, noting that dozens of other countries, including Spain, Mexico and South Korea, are considering similar taxes on the activities of Google and Facebook, among others. The UK’s “digital services tax” could come into effect by 2020 and raise as much as GBP 400 mn annually by 2022-23, the Financial Times notes.

Why do governments want to tax them? Because large US tech firms have been “reporting relatively little of their profit in local jurisdictions.” Yes, double taxation is a risk — but (a) that will get sorted out and (b) why should companies be allowed to do business in the UK (or Egypt, or wherever) without paying taxes when you can’t do the same with your offline business? The UK’s chancellor of the exchequer, Philip Hammond, says, “It is only right that these global giants with profitable businesses in the UK pay their fair share.” Bloomberg has a primer here.

The end of the Merkel era. German Chancellor Angela Merkel has announced she will be stepping down as Germany’s chancellor in 2021 and staying away from the political scene, according to the BBC. The announcement came during President Abdel Fattah El Sisi’s state visit to Germany. We have more on the visit in Diplomacy + Foreign Trade, below.

The 100-year-old “near-religious” status of case studies at Harvard’s MBA program is under attack in some quarters. Yes, by some who say the case studies under-represent women leaders and are dominated by American examples — but also by others who argue there’s simply a better way to teach business. Instead, business educations should “rigorously test theories” rather than focus on writing and Socratic-style teaching. (Financial Times)

In miscellany this morning:

• For the olds: Are your kids or younger siblings talking about CBD? Here’s what you need to know.
• 189 people died yesterday in the crash of an Indonesian commercial jet that was heading for an island resort, Bloomberg reports. It appears to be the worst airline disaster since the 2015 Metrojet crash in Sinai.
• The Boston Red Sox beat the Los Angeles Dodgers to win the world series of baseball in a postseason run that “cemented their status atop the sport and among the greatest teams of all time.” (New York Times)
• 60% of the world’s wildlife has been wiped out since 1970. As people, some of us are pretty great. As a species? We suck. (CBC)

Apple is expected to announce new iPad Pros and Macs, among other hardware, at an event that gets underway today at 4pm CLT. Watch the event live at the appointed hour.

The Education Ministry has closed down several unlicensed private tutoring centers in recent raids, Education Ministry spokesperson Ahmed Saber told Hona Al Asema. Legal action was also taken again unlicensed tutors, while registered teachers found working at these institutes have been referred to the ministry for investigation. The ministry will be launching its own after-school remedial classes program for students, which should also help increase teachers’ salaries and allow them to stop relying on private classes (watch, runtime: 7:17).

The government is building a new oncology center in Sharqiya. The center has been on the table for some time but construction had stopped due to budget constraints after the EGP float in November 2016, Cabinet spokesperson Nader Saad told Hona Al Asema. Prime Minister Moustafa Madbouly ordered the government yesterday to resume work on the facility, which should be complete within 18-24 months (watch, runtime: 7:44). The story was also on Masaa DMC (watch, runtime: 7:08).

Meanwhile, cyber security expert Adel Abdel Moneim and Rep. Mohamed Hegazy discussed ways to detect false news with Amr Adib on El Hekaya (watch, runtime: 6:03).

** #2 Competition watchdog says Ousta’s collapse pushed it to act on Uber, Careem merger: The shutdown of Egyptian ride-hailing app Ousta signaled that the Egyptian Competition Authority (ECA) needed to keep an eye on the fast-growing industry, ECA head Emir Nabil said at a press conference on Monday, according to AMAY. “There is a trend in the ride-hailing apps sector away from competition, as evidenced by the collapse of Ousta,” said Nabil. He also noted that both Careem and Ousta had filed antitrust complaints against Uber, claiming the global industry leader was trying to force a price war. The merger of Careem and Uber, which is could be worth as much as USD 2.5 bn, has the potential to hurt mns of users as well as the drivers who work for these companies, he added.

Nabil said both companies acknowledged that merger talks were happening, but claimed the ECA acted when neither Uber nor Careem disclosed details on the transaction talks (shocking that they may want to negotiate a transaction behind closed doors, we know…). The ECA had recently issued a warning to Uber and Careem that they could face fines of EGP 500 mn each unless they formally seek an ECA exemption from the Antitrust Act.

ECA trying to calm market on its push to regulate M&A: “The ECA does not want to stand in the way of M&As, but it must take steps if the risks of an M&A to the market are too high,” said Nabil. We’re taking that as a bid to calm fears that the ECA was using the Uber, Careem merger as a lever to gain more control over mergers and acquisitions. The ECA has been trying for the past two years to amend the Antitrust Act to give it sign-off powers on all M&A worth more than EGP 100 mn.

In other ECA news, the authority is planning to look into the spike in potato prices, which has been driving the country hysterical of late. A working team has been formed to study pricing in the market. Nabil also noted that the ECA was cooperating with the UN on a new antitrust legal and policy research center in Cairo, which will launch on 19 November, according to Youm7.

Speaking of spuds: Potato prices were still getting air time last night. Nabil, as well as cabinet spokesperson Nader Saad and Consumer Protection Agency head Reda Abdel Moaty phoned into various talk shows last night to discuss the issue (watch here, runtime: 12: 39, here, runtime: 7:44, here, runtime: 2:24, and here, runtime: 2:15). Amr Adib also took note on El Hekaya (watch, runtime: 2:17).

** #2 2017 wasn’t a great year for foreign investment in Egypt, but real estate, hospitality and construction were winners (at least on a project-count basis), according to a 2017 EY Africa report on FDI (pdf) released yesterday. The report, which looks at FDI on a volume-of-projects basis as opposed to in USD terms, says Egypt’s attractiveness to offshore investors slipped to sixth place among its African peers as new projects fell to 56 in 2017 from 79 in 2016. The telecoms, consumer products and mineral resources sectors all saw fewer new projects kick off in 2017. Our market share of FDI-backed projects in North Africa fell 30% y-o-y, it says. Using CBE data, we see net FDI fell to USD 7.7 bn in the state’s 2017-18 fiscal year from USD 7.9 bn in previous fiscal year.

Egypt was a regional hotspot for real estate: EY notes that Egypt, along with Ethiopia, was the most sought after destination for projects in real estate, hospitality and construction sectors. FDI in those sectors more than doubled to 105 projects in 2017 from 45. The report notes that sentiment in Egypt was still high on the back of the ongoing recovery in tourism and the Madbouly government’s economic reform program.

Keep it all in context: We may be turning a corner in 2018, according to an UNCTAD report out earlier this month. Egypt was the most attractive destination for FDI in Africa in the first half of this calendar year, with the total inflows up 24% compared to 1H2017, according to the UN body. This came despite a 3% decline in inflows to Africa in 1H2018.

But if interest rates don’t go down, you can forget about a significant pickup in foreign or domestic investment.

Continent-wide, EY says FDI was concentrated in ‘next generation’ sectors such as manufacturing, infrastructure and power generation. Morocco was the star of the EY report, with a 19% y-o-y increase in project volume last year. South Africa, Kenya, Nigeria and Ethiopia rounded out the top five, which together accounted for 40% of the continent’s FDI projects. Inbound FDI was led by US investors last year, followed by Western Europe, namely the UK, France and Germany.

** #4 EXCLUSIVE- The Madbouly government has started work on the FY2019-20 budget, with various government departments tallying up their budgets and projection, a senior government official told us yesterday. The government is targeting GDP growth of 6% in its next fiscal year, up from 5.5% this fiscal year. The Finance Ministry apparently expects the budget deficit will fall to 8% of GDP in FY2019-20, despite the spike in oil prices.

Egypt will eliminate fuel subsidies next fiscal year as per the IMF-sanctioned economic reforms, which will drastically reduce the deficit, noted the source. Tax revenues are projected to go up 15% next year, from a projected 14.6% growth rate this year. The government hopes to reduce Egypt’s public debt to 88% of GDP, largely through its debt control strategy.

It is early days yet, but the Finance Ministry is budgeting for oil at USD 80/bbl in its next budget, the official said. The ministry reportedly believes oil in the neighborhood of USD 80/bbl could be the new norm and will provide a realistic threshold when calculating fuel subsidies cost, the source noted. Egypt has already overshot its budgeted expenditures on fuel in 1Q2018-19 by around EGP 1 bn thanks to higher than projected oil prices, according to Finance Minister Mohamed Maait. The government had expected oil prices to average USD 67/bbl this year. Other government sources had told us that the spike in oil prices could see the budget deficit rise to 8.6% of GDP in FY2018-19, from an initially projected 8.4% of GDP.

** #5 Egypt’s non-oil exports rose 11% y-o-y in 9M2018 to USD 18.5 bn, up from USD 16.6 bn in the same period last year, data from the General Organization for Export and Import Control (GOEIC) showed. Imports have gone up 14% y-o-y in the same period, reaching USD 49.1 bn from USD 43.2 the previous year.

** #6 Global economic volatility could force countries to adopt “inward-looking,” consumer-driven growth models, says Farid: Global economic volatility could lead to policy changes and new growth models being adopted around the world, EGX Chairman Mohamed Farid told Zawya on the sidelines of the annual conference of the Federation of Euro-Asian Stock Exchanges (FEAS) in Abu Dhabi. Farid said the world might be forced to divert its focus from exports and adopt more “inward-looking, consumption growth models.” The chairman stressed the importance of strengthening venture capital and private equity firms to fund entrepreneurs and startups.

INVESTMENT WATCH- Enara wants to invest USD 200 mn to sell solar power direct to consumers: Enara Capital is lining up capital for a USD USD 200 mn pipeline of solar power projects with a combined generation capacity of 200 MW, CEO Sherif El Gabaly said. The company is in talks with the government to sell the power from these plants directly to consumers under an independent power producer (IPP) framework. El Gabaly had said back in February that the company was looking to invest USD 300 mn over the course of the next five years in power plants with a combined production capacity of 300 MW.

INVESTMENT WATCH- Military Production Ministry in talks with Chinese investors on USD 1 bn solar panel plant: The Military Production Ministry is in talks with an unnamed Chinese company to partner on a USD 1 bn solar panel factory in Aswan, ministry officials tell Al Mal. The ministry plans to hold a 51% stake in the project, the source noted. The plant would cater to the demand of the domestic market and later target export sales, the newspaper says. The ministry had been in talks with China’s Golden Concord Group on a USD 2 bn solar panel manufacturing plant, with the two signing an MoU for the project in May. Talks are since believed to have broken down.

LEGISLATION WATCH- House mulls legislation that could make it easier to clear Egypt’s arbitration backlog: The House of Representatives’ Legislative Committee is reviewing a law that could help fast-track the resolution of investor disputes that center on state-owned companies where the Administrative Court has tried to reverse privatizations ales. The law would allow the Prime Minister to refer these cases to the Investment Ministry’s investors disputes resolution committees to negotiate settlements. The law would also shield the Public Enterprises Minister from the legal ramifications of not enforcing the Administrative Court’s ruling, committee member Medhat Sherif tells Al Mal.

Background: The state sold shares in seven companies, including Nile Cotton Ginning and Omar Effendi, only to have the Administrative Court issue a ruling in 2011 invalidating the share sales. The decision drew Egypt into legal entanglements and international arbitration cases that are still ongoing. The law is meant to settle the cases with these seven companies, Public Enterprises Minister Hisham Tawfik said. We’ve been seeing reports as recently as this month that Nile Cotton and Ginning’s foreign investors were about to proceed with arbitration suits.

Wheat rises after Egypt’s rare purchase of US cargo: Chicago futures wheat rose on Monday after Egypt’s General Authority for Supply Commodities (GASC) bought US wheat for the first time since May 2017, Reuters reports. Wheat contract on the Chicago Board of Trade gained 1.5% on Monday. GASC purchased 470k tonnes of wheat in an international tender on Friday for delivery between 11-20 November, including 60,000 from US suppliers.

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The first annual Middle East Conference on Business Angel Investment will take place on Thursday, 1 November in El Gouna, according to a statement from the Middle East Angel Investment Network (MAIN). The conference will bring together angel investors, venture capitalists and others to discuss the latest trends in fintech, clean tech, health technology and transportation technology.

Egypt’s World Youth Forum 2018takes place in Sharm El Sheikh on Saturday, 3 November.

The draft SMEs Act is expected to be made public within a week, SMEs Development Authority head Nevine Gamea said on Wednesday, according to Al Mal. The draft law sets out incentives — mainly in the form of services and subsidized access to finance — for owners of micro-, small- and medium-sized enterprises to go legit and pay taxes.

The central bank reviews interest rates in a little over two weeks’ time. The CBE’s monetary policy committee meets on Thursday, 15 November.

African countries are failing to create enough jobs for their young populations: Africa’s deteriorating business environment will inevitably mean the continent will never be able to generate enough jobs for its growing working-age population, according to data from the Mo Ibrahim Foundation’s Index of African Governance (pdf) picked up by the Financial Times. Unlike Europe and China, whose working-age populations will drop by the mns over the next 35 years, Africa, where the median age is 19, is expected to see its working-age population rise by some 900 mn people between 2015 and 2050.

“Trickle down” has failed in Africa, says Mo Ibrahim: “Our gross domestic product has grown by a considerable amount over the past 10 years, but we haven’t translated that into a sustainable economic opportunity,” said Mo Ibrahim, the Sudanese businessman whose foundation aims at improving governance in Africa. “Some people got really rich and enjoy all the fruits of economic boom, but no more jobs or economic opportunity were created. Trickle down doesn’t work.” Data showed that Africans across the continent’s 54 countries mostly work in the informal sector and are not too happy with their jobs.

Pessimism pervades the report: The report gives credit to some countries for imposing economic policies to boost growth or improving their infrastructure with the help of Chinese investments, but says it’s not enough, pointing to countries’ failure to diversify their economies or increase their exports. It expected the continent’s deteriorating business environment, including in key economies like South Africa and Egypt, to lead to “brain drain, political and social unrest, instability and armed conflict.”

** #7 When the Economist trolls, it trolls hard: “Even a firm that sells cigarettes to addicts is a hard sell” the magazine (no, dudes, you’re not a newspaper) declares in its headline about the delay in Eastern Company’s share sale. Eastern’s share sale could have been the success story the government was hoping for to kickstart a privatization program through which it looked to raise EGP 10 bn to tighten its ballooning budget deficit. This would have been the case had it not been for the dark cloud that has left emerging markets stock indexes 25% down, the publication notes. The state-run company delivered a profit of USD 239 mn in its most recent fiscal year, a 43% increase from the previous year, thanks to Egyptians being very fond of their favorite vice despite costs going up 20% since 2016. After describing Egypt as a minor basket case, the piece concludes by suggesting that “Stressed bureaucrats may need a smoke.” Better that than a firing squad had they sold 4.5% of Eastern and seen the share price tank in the aftermarket as the global Emerging Markets Zombie Apocalypse continues to unfold. There are times when the Economist marries rapier wit, sarcasm and deep analysis to teach us a thing or two. Then there are times when it’s just…sophomoric at best. This is the latter.

Other headlines worth noting in brief

• The House of Representatives is working on a bill to shut down Islamist websites, Asharq Al-Awsat claims, citing sources in parliament.
• Irish-Egyptian Ibrahim Halawa is speaking again to the Irish Independent on his four-year spell in Egypt’s prison.
• The recent Egypt-Russia strategic cooperation protocol agreement will ramp up bilateral ties and reaffirm a long-held relationship, Menna Farouk writes for Al-Monitor.
• It’s someone else’s fishermen for a change: Six Pakistani sailors have been stuck for six months in Egypt’s Safaga Port, as their ship owner has not yet cleared disagreements over port charges, Pakistan’s Geo TV reported.
• Match fixing? Algeria’s national team manager claims the team was instructed by Algerian authorities to throw its 2010 AFCON semifinal against Egypt, according to Ghana Soccer Net.

People should not be allowed to hold events at historical sites, Amr Hashem Rabie writes in a piece for Al Masry Al Youm. He argues that out of concern for national heritage, authorities should stop giving individuals permission to hold weddings at ancient sites such as the temples of Karnak and Philae. The preparations alone — such as setting up for lights and music (not to mention the guests who would then be running around) — could be destructive and can accelerate the erosion of monuments that have stood for thousands of years.

El Sisi’s second day in Berlin: President Abdel Fattah El Sisi met yesterday with the CEO of Germany’s ThyssenKrupp, Ralph Reichmann, to discuss ways to boost cooperation on fertilizer manufacturing, Ittihadiya said in a statement. Reichmann said his company that his company is willing to study new investments in Egypt.

El Sisi also met with a number of state officials while in Berlin for the G20 Compact with Africa conference, including his German counterpartFrank Steinmeier, Economic Cooperation and Development Minister Gerd Müller for talks on economic and education development, and Bundestag President Wolfgang Schäuble. El Sisi, who’s in Berlin for four days, is also set to hold bilateral talks with the German Chancellor Angela Merkel. His visit comes the EU looks to cement a policy of having North African countries police waters for illegal migration in exchange for development aid. EU officials have been promoting Egypt’s role in this.

Also from Berlin, El Sisi spoke on the phone with South Sudanese President Salva Kiir to assure him of Egypt’s continued support for the South Sudan peace process, an Ittihadiya statement reads.

The trip was all over the airwaves, with coverage on El Hekaya (watch, runtime: 5:31), Hona Al Asema (watch, runtime: 51:50), Al Hayah Al Youm (watch here, runtime: 5:21 and here, runtime: 5:19), and Masaa DMC (watch, runtime: 4:26).

The European Bank for Reconstruction and Development (EBRD) will be helping KarmSolar raise financing for a 10 MW solar power station that it’s building for a “prominent client,” KarmSolar announced in a press release yesterday (pdf). The company signed a mandate letter with the EBRD for the funding that will also see the latter provide KarmSolar with “technical assistance for its governance and compliance efforts to make sure the company is ready for an eventual IPO.” KarmSolar — which has already signed a power purchase agreement for the station — is hoping to reach financial close in January 2019, Chairman Amr El Sawaf said. No further details were provided.

Egypt’s strategic wheat reserves are enough to last until the first week of March, Supply Ministry spokesman Ahmed Kamal said, according to Reuters’ Arabic Service. The state buyer recently purchased 470k tonnes of wheat in an international tender for delivery between 11-20 December.

An alliance of German Universities known as the UAS7 plans to establish a German university for applied sciences at the new administrative capital, Higher Education Minister Khaled Abdel Ghaffar said, according to Youm7. The project will be developed with support from the German government and German Development Agency (GIZ), Abdel Ghaffar said. The school should be open its doors to incoming students by 2020, he added. No further details were provided.

Sharm El Sheikh International Airport received yesterday its first flight from the Kazakh capital of Taraz, which carried 221 Russian tourists, Ahram Online reports. The airport will be receiving one flight a week from Taraz.

South Korea’s Giga Global For Telecom & Technology (GGTT) and Korea Telecom will be supplying the Suez Canal with its new technology system that should help increase the internet speed in the area to 1GBps, Korea Telecom Chairman and CEO Chang-Gyu Hwang announced at a press conference yesterday, Al Mal reports. The two sides signed an agreement to that effect yesterday, but provided no details on the value or timeline of the contract.

** #8 A Cairo court ordered the release of author Abdel Khalek Farouk yesterday, pending further investigation of charges he spread false news in a forthcoming book critical of the economy, according to Al Masry Al Youm. Farouk was arrested this month along with the publisher of his upcoming book “Is Egypt a poor country?”

Saudi-owned Egyptian football club Pyramids announced yesterday that retired Ahly and Zamalek striker Hossam Hassan has been named team manager in place of Argentinian coach Ricardo La Volpe, Ahram Online reports. Hassan resigned from his post as El Masry club’s head coach on Monday morning, but the club’s board has apparently rejected his resignation hours after his new appointment was announced.

** #9 Upcoming Middle Eastern directors could bring more Oscars home: Young, upcoming Middle Eastern directors could bring Oscars home with their innovative and unique approachesto filmmaking, says Al-Monitor. “If the young directors pull off a few international awards in 2019, it may mark the beginning of a youth revolution in Middle Eastern cinema,” film blogger Ismail Sonaa said. Egypt’s Yommedine, and Lebanese writer and director Nadine Labaki’s Capernaum are the region’s frontrunners for best foreign films in the 91st Academic Awards ceremony. Yommedine emerged as a jewel among critics after its screening in Cannes Film Festival earlier this year where it had won the François Chalais Prize and was selected shortly after to represent Egypt in the Academy Awards’ Foreign Language category.

Egyptians are into some unusual sports…and are very good at them, apparently. Egypt’s national speedball team snatched all gold medals at the 30th edition of the Speedball World Championship this week, Ahram Online reports. We beat France in both the single- and double-match edition of this game, which is basically a lazy version of tennis or squash and involves players using a racket to hit a ball tethered to a pole by a string (watch here, runtime: 0:45). Meanwhile, 37-year-old Ashraf Mahrous hosted a pro wrestling event in Ismailia that attracted thousands of spectators. Mahrous is also the founder of the Egyptian Arab Federation of Professional Wrestlers. Reuters has the story.