The state is going to crack down on price gougers

It’s shaping up to be another busy week as 2018 roars to a close and as those among us saddled with strategy and budget responsibility scramble to finish up their work.

News triggers this week:

• The Africa 2018 conference ends today. The gathering was the source of plenty of announcements this past weekend; expect a light trickle of news today.
• The FRA will hear Beltone Financial’s appeal on Monday against a six-month suspension handed to the firm’s investment banking arm.
• The House is back from recess this morning. The general assembly had been on break the past week and a half, though committees had continued to meet.
• Elsewedy Electric and Arab Contractors will ink this week the final contracts for a USD 3 bn, 2.1 GW hydroelectric dam in Tanzania
• Tourism will be in the spotlight on Thursday when Rania El Mashat unveils her ministry’s reform for the industry program at an AmCham gathering

Things you can go to this week:

• Startup gathering RiseUp draws to a close today at the Greek Campus in downtown Cairo.
• The Food Africa Expo continues through Tuesday.
• EFG Hermes’ annual Egypt Day Summit runs Tuesday through Thursday. We look forward to seeing many of you at Tuesday’s CEO Dinner

There are plenty of other conference and events taking place this week and into next. We have more in our Calendar section on the website this morning.

US stock indexes fell more than 4% last week as “investors’ retreat from US stocks turned into another rout on Friday,” the Wall Street Journal writes. That has the technical analysis types up in arms, warning that a “death cross” in whatever sheep’s entrails they read suggests more losses ahead for US equities in the short term. Death cross or no, Bank of America is the latest to declare that the days of low volatility are over — with plenty of implications for investors, including a suggestion they may need to re-think buying the dip.

Markets factoid of the morning: It hasn’t been this bad since ‘72: “With bond and equity markets from the United States to emerging markets all on pace to lose money this year, investors have not seen this much red on their screens since 1972, the last time no asset class returned at least 5 percent,” according to Reuters, which notes that some fund managers are looking at potential investments in 2019.

The contrarians think 2019 looks good for emerging markets — and bad for both US equities and the USD. These are the same people who correctly predicted the EM Zombie Apocalypse, the greenback’s rally this year and the return of volatility to the US stock market. READ: Contrarians made the right market calls in 2018. Here’s what they’re saying now on Bloomberg.

None of this necessarily bodes well for the notion that 2019 will be the year of tech IPOs. Uber and rival Lyft have filed documents for initial public offerings, and Uber’s IPO is expected to be one of the five biggest of all time, Bloomberg reports — the company was valued at USD 76 bn when it sold a stake to Toyota in September, but some see a valuation as high as USD 120 bn. Other major global tech companies thought to be planning IPOs in the new year include workplace messaging app Slack (which powers Enterprise, incidentally), rental platform Airbnb, spooky data company Palantir and payments provider Stripe, the Financial Times suggests. The question nobody is asking this morning: How do those IPO plans look set against what could be a very turbulent 2019.

Self-driving cars in Egypt? President Abdel Fattah El Sisi discussed yesterday with Mercedes Benz Cars Production Chain Head Markus Schaefer a proposal to manufacture self-driving cars in Egypt, according to an Ittihadiya statement. While no details were provided, and we would’ve liked some, the proposal could see Mercedes manufacture the vehicles locally for Egypt’s new cities. This comes as the government looks to cooperate with the German company in the field of auto manufacturing.

Rapprochement? We don’t need no steenking rapprochement: The emir of Qatar won’t be attending today’s Gulf Cooperation Council summit in Riyadh, batting away an olive branch extended by KSA and the UAE just days after the statelet said it would withdraw from OPEC.

Other international headlines worth knowing about this morning:

Oil jumped nearly 6% at one point on Friday after OPEC and non-OPEC producers agreed to cut production by 1.2 mn barrels per day starting next year, Bloomberg reported.

US authorities want Canada to extradite Huawei’s CFO on allegations of fraud, claiming Meng Wanzhou (who is the daughter of the company’s founder and one of its vice chairs) lied to circumvent US sanctions on Iran. China has called on Canada to free Meng or “face consequences.”

Saudi Arabia carefully cultivated ties to Jared Kushner, the New York Times reports in an investigation led by former Cairo hands David Kirkpatrick and Ben Hubbard.

PSA- Winter weather is officially here. After last week’s rain, we’re looking at an unseasonably cool 10°C overnight tonight and then daytime highs of 21-22°C and overnight lows of 12°C all week.

Oh, and may we please mention that Egypt has made Condé Nast Traveler’s list of 19 Best Places to Go in 2019?

The Africa 2018 Forum was in the limelight on last night’s talk shows, with Hona Al Asema recapping the highlights and major agreements that were signed on the first day of the event (watch, runtime: 06:09). El Hekaya’s Amr Adib also gave his two cents on Africa being a great market for Egyptian businesses (watch, runtime: 05:54).

The Health Ministry has added several new chemical compounds to its list of outlawed substances, head of the Central Department of Mental Health and Addiction Control Dr Menan Abdel Maksoud told Reham Ibrahim on Hona Al Asema. Abdel Maksoud discussed the ministry’s process in determining detrimental substances to add to its watch list (watch, runtime: 05:18)

Good karma for putting up with a frivolous lawsuit? Actress Rania Youssef told El Hekaya’s Amr Adib that she has been offered a role in a foreign film after her dress debacle (watch, runtime: 02:00).

Elsewhere, the talking heads preoccupied themselves with updates on the protests in France. See El Hekaya’s Amr Adib (watch, runtime: 06:52), Masaa DMC’s Eman El Hosary (watch, runtime: 12:07), and Hona Al Asema’s Reham Ibrahim (watch, runtime: 03:09)

PMI: Non-oil business activity contracts for third month in a row: Private sector activity contracted for the third month in a row in November, but at a slower pace than the previous two months, according to the Markit / Emirates NBD purchasing managers’ index (pdf). The PMI rose to 49.2 in November from 48.6 in October, closely missing the 50 expansion mark. “The recovery in the headline PMI in November to a three-month high is encouraging,” Emirates NBD MENA economist Khatija Haque said. Declines in output, new orders, and export orders were behind the contraction.

Employment index falls: Some of the surveyed firms said they actively let staff go in response to falling demand. “Although the declines in output and new work were relatively modest, the employment index fell to its lowest level since March,” Haque said.

But sentiment was positive: “Overall sentiment was positive, with many companies hoping that market stability will encourage demand.”

Average yields on Egyptian treasury bills were stable on Thursday, the first auction after the country scrapped the repatriation mechanism. The average yield on one-year T-bills was 19.97%, compared to 19.92% at the last similar auction, while the average yield on 6-month T-bills was 19.98%, compared to 19.89% at the last auction, CBE data showed.

Speaking of the repatriation mechanism, IMF Mission Chief to Egypt Subir Lall praised the decision in remarks carried by state news agency MENA. Lall said the move was timely and critical to the advancement of the Madbouly government’s reform program. The mechanism played a key role in the first phases of the program, he noted, helping attract portfolio investment. Scrapping the mechanism sends the right message to investors, said Citibank Egypt’s country treasurer, Mohamed Abdel Kader, underlining that Egypt has put the days of foreign currency shortages behind it and is now on the road to recovery.

IPO WATCH- Four international financial institutions are looking to buy stakes in Banque du Caire as soon as its IPO is announced, CEOTarek Fayed said on the sidelines of the Africa 2018 Forum in Sharm El Sheikh. Fayed said he expects the IPO to take place in 2019, but said the final timing would be subject to market conditions.

Look for EBRD to buy a stake: The European Bank for Reconstruction and Development (EBRD) is at top of the list of institutions looking to buy shares, Fayed said, confirming BdC and EBRD have already discussed a transaction. Fayed gave no details on the size of the stake the bank was planning to offer or name the three other banks interested. Egypt said in October it would postpone its share-sale program due to market volatility.

Background: EBRD Managing Director for the Southern and Eastern Mediterranean Janet Heckman told Enterprise last week EBRD has appetite for BdC. Heckman also noted that the bank plans to invest some EUR 1.2 bn in Egypt in 2019.

IPO WATCH- Zaki Hashem gets Enppi mandate: Zaki Hashem & Partners has been appointed as domestic counsel to Engineering Company for Petroleum & Process Industries (Enppi) in the latter’s upcoming local and international offering of shares, we’re told. The Enppi IPO is one of the pilot transactions for the state’s privatization program

M&A WATCH- Int’l bank may back Medhat Khalil’s take-private bid for Raya: An unnamed international investment bank could finance Medhat Khalil’s bid to take Raya Holding private, Khalil said, according to Masrawy. The bank is one of four financiers Khalil had approached since the Financial Regulatory Authority ordered him last October to mount a mandatory takeover for Raya or sell down his stake. Khalil has previously said he was seeking EGP 700-800 mn in acquisition finance. The news comes after Khalil requested a two-month extension on the 27 November deadline to complete the MTO.

INVESTMENT WATCH- Cairo-based Nawah Scientific has raised USD 1 mn in a pre-series ‘A’ funding round, Menabytes reports. The round was led by Endure Capital and joined by 500 Startups, Averroes Ventures and Egypt Ventures. Founded in 2015, Nawah bills itself as “the first, private, multidisciplinary research center in Egypt catering for natural and medical sciences” provides outsourced testing for researchers who do not have access to advanced gear.

INVESTMENT WATCH- The International Finance Corporation invested USD 1 mn in Vezeeta as a follow-on investment to a September series ‘C’ fundraising round in which the online platform raised USD 12 mn, it said in a statement. Vezeeta, an app that helps connect patients with physicians, aims to use the funding to strengthen its operations in Saudi Arabia, Egypt and Jordan as well as expand into other countries in the MENA region. The September series ‘C’ was led by Saudi Arabia’s STV.

ECM WATCH- Matouk Bassiouny & Ibrahim has closed a rights issue for Ajman Bank, the UAE-based shariah-compliant lender, the firm said in a statement. The transaction raised nearly AED 420 mn in a fully-subscribed rights issue. Emirates NBD Capital was lead manager and sole bookrunner for the transaction, while Emirates NBD was lead receiving bank. Ahmed Ibrahim, managing partner at the firm’s Dubai office, led the transaction for Matouk Bassiouny & Ibrahim.

The Africa Forum 2018 in Sharm kicked off yesterday. Among the takeaways from the many announcements of the past 24 hours:

• EBRD is backing accelerators Falak, EFG-EV Fintech and Misr El Kheir, offering advisory support to each of them and their portfolio companies, the institution said in a statement (pdf).
• Falak Startups signed an MoU with Enara Capital to establish a startup accelerator and investment fund exclusively for clean technology startups, according to an Investment Ministry statement.
• Telecom Egypt inks data center and infrastructure agreement: Liquid Telecom is investing USD 400 mn (EGP 8 bn) in Egypt over the next three years in an agreement signed with Telecom Egypt, according to a statement from the Investment Ministry and a Liquid Telecom press release.
• Kitchener Drain rehab gets funding: The European Investment Bank and the Housing Ministry signed a EUR 213.9 mn agreement for the Kitchener Drain depollution project, according to Ahram. The drain passes through Dakahlia, Gharbiya and Kafr El Sheikh.
• The Suez Canal Authority inked two agreements to develop Ain Sokhna and West Port Said, according to a ministry statement.
• EGP 2.2 bn in financing for Sinai: Kuwait’s Fund for Arab Economic Development will finance sewage, desalination and agricultural wastewater projects in Sinai worth a combined EGP 2.2 bn, the Investment Ministry said yesterday. The fund has earmarked USD 1 bn to support development in Sinai through 2021, Al Mal reports.

LEGISLATION WATCH- House puts high prices and “monopolistic practices” in the crosshairs as state launches crackdown on price gougers: The House of Representatives is scheduled to discuss today proposed amendments to the Supply Affairs Law and the Egyptian Competition Act in a bid to curb the rising price of basic goods and commodities, Ahram Online reports. If passed, the amendments would grant sharper teeth to Supply Ministry, Consumer Protection Authority, and Interior Ministry inspectors “to help them discipline the local market” and crack down on what they see as high prices. The changes would also increase the fines imposed on traders found guilty of “hiding” strategic goods to drive up prices. The House legislative and economics committees, which have completed their review of the proposed amendments, said these changes are necessary to regulate prices after the reduction of subsidies and the EGP float led to some traders “exploiting” these reforms to “manipulate prices and double their profit margins.”

El Sisi, intelligence boss and top anti-corruption watchdog are backing the drive: The debate in the House comes after President Abdel Fattah El Sisi met with the head of the General Intelligence Directorate, the chairman of the Administrative Control Authority, Prime Minister Moustafa Madbouly and a host of ministers to discuss ensuring commodities remain available at affordable prices as well as “measures for market monitoring and consumer protection.” Read the full statement from Ittihadiya here (pdf).

Background: Inflation has accelerated for two consecutive months, with annual headline inflation rising in October to 17.5%, largely on the back of higher vegetable prices, despite the government’s efforts to ease price increases. President Abdel Fattah El Sisi has regularly directed his government to ensure basic goods are available at “reasonable prices” on the market. The Consumer Protection Act, which El Sisi had ratified in September, also sets a legal framework by which the government can impose price controls.

CABINET WATCH- Cabinet gives preliminary nod to Customs Act amendments: The Madbouly Cabinet has approved “in principle” amendments to the Customs Act, according to a statement. The amendments should create an expedited track for customs clearance, a ‘whitelist’ of trusted importers, and broaden the Customs Authority’s discretion. The government is expected to introduce the proposed changes to the House of Representatives “soon.”

Other decisions made at the cabinet table during the Council of Ministers’ meeting last week:

• Signing off on an EUR 148 mn facility for the Kitchener Drain depollution project from the EBRD (we have more above);
• Accepting a EUR 4.01 mn grant to support entrepreneurs in the agriculture, ‘clean’ and renewable energy, and arts and handicrafts industries;
• A USD 600k grant from the Korea-Africa Economic Cooperation development fund for a wastewater treatment plant in Abu Rawash;
• The Promoting Resilience in Desert Environments (PRIDE) project to improve the productivity of desert land reclaimed in rural areas around Marsa Matrouh.

LEGISLATION WATCH- Unified Building Code, temporary law on building code violations to be issued next month: The House of Representatives expects to pass the Unified Building Code and a temporary law on settling building code violations together sometime next month, House Housing Committee member Rep. Ismail Nasr El Din tells Al Shorouk. The executive regulations for the two bills will likely also be issued in January, according to Nasr El Din. Considering how long it has taken for these two bills to see the light, we’re not going to be holding our breath.

LEGISLATION WATCH- Expect amendments to the trademark law? The Internal Trade Development Authority is working on amendments to the trademark law, which it plans to send to the House of Representatives for review, said agency head Ibrahim Ashmawy, according to Al Ahram. The current law doesn’t require businesses to register a trademark for their activities and doesn’t identify a supervising body or fines or punishments, Ashmawy said. The amendments will aim to fix any shortcomings in the current law to protect investors and consumers alike from fraud.

Food exports are expected to decline 3% by the end of this year, rather than grow 10% as was expected at the beginning of the year, head of Egypt’s Food Export Council Hani Berzi said. According to Berzi, the decline comes on the back of a two-year delay in the release of export subsidy payments, which has made it difficult for companies in the food industries sector to compete in foreign markets. A lack of stability in Arab markets has also negatively impacted Egyptian food exports, Berzi said.

Italy showing Egypt love despite Regeni tensions: Investment Minister Sahar Nasr has signed a EUR 45 mn agreement with Italian Ambassador to Egypt Giampaolo Cantini to support training and technical programs for SMEs and financing for companies that need to purchase production inputs, according to a ministry statement. Italy is also backing the launch of an internship program known as the Youth Employment Program for El Roda Company for Agricultural Development, an Egyptian start up, in partnership with the European Union and The European Bank for Reconstruction and Development, according to a statement. The support comes despite renewed tension between the two countries as Italy presses the Egyptian government for answers over the death of Giulio Regeni.

MOVES- Public Enterprises Minister Hisham Tawfik has appointed Nabil Dweidar as the interim head of the Holding Company for Maritime and Land Transport, replacing Mohamed Youssef.

No single story is leading the conversation on Egypt in the foreign press, with outlets busying themselves with a range of topics, including self-censorship, which Yasmine El Rashidi writes for the New York Times has become the new norm to avoid retribution in the public sphere.

Women’s issues: The Jerusalem Post claims that Christian women in Egypt are facing an “epidemic of kidnapping … beating and torture,” while Dina Zakaria writes for WaPo that women who speak out about [redacted] harassment in Egypt are met with allegations of terrorism. On the flipside, Egyptian director Ahmad Abdalla’s new film EXT.com about an empowered lady of the night roaming the streets of Cairo receives international acknowledgement in Variety.

Trade and investment: Poland’s Prime Minister identified Egypt, Nigeria, and South Africa as the top three African investment destinations, reports Today.ng.

Security and defense: Egypt’s defense expo highlights its strategy of diversifying its allies the National says, while Reuters notes that Egyptian police killed two terrorists who were involved in an attack on a bus carrying Christians last month that killed seven people.

Climate change and population growth: News24 writes about the perils climate change is posing to the Nile and crops in the Delta region. Xinhua also takes note of the challenges posed by Egypt’s rapidly growing population.

Egypt’s state-owned dailies are maintaining the theme of focusing on government-sponsored conferences, with Al Ahram, Al Akhbar, and Al Gomhuria all running stories on the Africa 2018 Forum on their front pages this morning. Al Ahram also features Telecom Egypt and Liquid Telecom’s data center USD 400 mn agreement (see Speed Round, above, for more) and (of course) the latest and greatest from Mo Salah.

The African Export Import (AfreximBank) Bank has earmarked USD 2 bn for Egypt in 2019, President Benedict Oramah said during the Africa 2018 forum in Sharm El Sheikh, according to Al Mal. The new financing will be directed largely towards manufacturing and petrochemical projects.

New Saudi ban on Egyptian agri products: Saudi Arabia has banned imports of agricultural products from 56 Egyptian farms due to unsafe levels of residual pesticides and apparent violations in shipments, sources from the Agricultural Quarantine Authority said. The banned produce includes pomegranates, guavas, and peppers. Egypt and the kingdom had signed a protocol on produce that would impose a six-month ban on farms for their first offense. Saudi Arabia has previously banned imports of several Egyptian crops due to pesticide residue.

Egypt’s natural gas production is expected to reach 8 bcf/d by 2021, up from 6.2 bcf/d currently, a source from the oil industry said. The increase in production will meet domestic demand and allow Egypt to export surplus to global markets through the Idku and Damietta liquefaction plants.

The New Urban Community Authority has awarded Hassan Allam Construction a contract to build a EGP 2.2 bn water treatment plant in the new administrative capital, Al Shorouk reports. No further details were provided.

The General Authority for Supply Commodities purchased 350,000 tonnes of wheat last Thursday in an international tender, according to Reuters. Nearly 83% of the purchase is of Russian wheat, with the rest being Ukrainian. Delivery is scheduled between 21 and 31 January.

Home appliance manufacturer Fresh Electric is planning to set up four new component and spare part production facilities in Egypt to decrease its reliance on expensive imports, Managing Director Bahaa Dimitri said, according to Al Shorouk.

A Russian security delegation will inspect Hurghada International Airport today, a security source said, according to Al Shorouk. The inspection process will last until 16 December, and is meant to determine whether the airport’s security procedures are up to standards and will allow Russia to resume charter flights to the Red Sea town.

American hardware giant Cisco Systems is eager to expand its presence and invest in Egypt, as well as cooperate with the government on its “digital transformation,” CEO Chuck Robbins said during a meeting with President Abdel Fattah El Sisi on Thursday.

Uber’s founding Chief Technology Officer (CTO) Oscar Salazar has joined the board of Egyptian tuk-tuk and motorcycle ride-hailing app Halan, the company announced at RiseUp on Friday, according to Menabytes. Salazar was also one of the investors in Halan’s series A investment round.

Ride-hailing company Careem will expand its bus service, which it launched last week in Cairo, to other governorates in six months, Careem Bus Director Hadeer Shalaby said. The company has invested USD 100 mn in developing its bus service.

The Saudi Finance Fund (SFD) will finance an agreement between mass transit app Swvl and EFG Hermes’ valU that will see the two provide installment plans for drivers at an interest rate of 5%, Al Masry Al Youm reported. No details were provided on the amount of funding SFD will provide. ValU signed a similar agreement with Uber with the Arab Investment Bank earlier this year.

A Mashreq Bank-First Abu Dhabi Bank-HSBC consortium is arranging a USD 750 mn, five-year loan for the Egyptian General Petroleum Corporation (EGPC), which will be used to pay off arrears to international oil companies, banking sources told Al Shorouk. Each of the three banks will contribute an equal share to the loan. The final contracts are expected to be signed in a week, and the loan should be disbursed before 28 December, sources said.

The Investment Ministry is mulling a three-year extension to the seven-year tax discount scheme introduced under the Investment Act, Minister Sahar Nasr said, according to Al Mal. If enacted, the changes would give new projects 10-year tax discounts from their date of operation. The scheme gives new investments in “underdeveloped” areas tax breaks of up to 50%, and up to 30% in other areas.

An Egyptian court has officially scheduled a hearing for a petition to cancel the two-term limit the constitution imposes on presidents for 23 December, MENA reported, according to Reuters. There has been much speculation on potential amendments to the constitution that would effectively allow President Abdel Fattah El Sisi to remain in office after the end of his second four-year term in 2022. Some have also proposed extending the duration of each term to six, rather than four years. Any constitutional amendments must also be approved by popular referendum.

Egypt, Britain and Italy’s naval forces held joint exercises in the Mediterranean Sea on Friday, according to an Armed Forces statement. The drills covered warship formations, underwater communication, and the process of conducting naval searches, among others.

Authorities have launched an investigation into explicit images allegedly made by a Danish photographer atop the Khufu Pyramid, CNN and Sky News reported. The photo can be found here, for those interested (don’t open with the kiddies around). The issue (naturally) received attention on the airwaves, with the Giza Plateau’s general director Ashraf Mohieldin saying on Hona Al Asema there is a chance the footage was fabricated (watch, runtime: 08:27). Masaa DMC’s Eman El Hosary (watch, runtime: 09:26) and El Hekaya’s Amr Adib also took note (watch, runtime: 05:19).