The EGP has hit a 2-year high against the greenback

It’s another quiet news day here at home — not that there’s anything wrong with that, as a brilliant show once suggested.

The Arab African Youth Platform convened by President Abdel Fattah El Sisi wraps up today. El Sisi used the gathering yesterday to call for further integration with Africa, according to a statement from Ittihadiya, and stressed that continued regional stability will help attract foreign direct investment.

Also today: Our friends at AmCham will convene their Annual Real Estate Conference this morning at the Nile Ritz Carlton.

Keep an eye on oil prices today: OPEC+ still has work to do if it wants to keep the global oil market balanced, Saudi Energy Minister Khalid Al-Falih said at a news conference yesterday. Falih was speaking ahead of today’s meeting of OPEC plus 10 large non-member producers who are cutting crude production, but who are also split on whether the cuts should stay in place until the end of this year. Bloomberg and the Wall Street Journal have the story.

From Planet Finance: Deutsche Bank and Commerzbank confirmed reports last week that they’re in merger talks. The two are the largest listed German banks. “A merged bank is likely to rank as the third largest in Europe behind HSBC and BNP Paribas,” Reuters notes. The Financial Times also has the story, while Bloomberg has a timeline for the two institutions, each of which turns 150 years old in 2020.

Bond traders are hungry for action, but the Fed is looking set to “stifle volatility more,” Bloomberg reports. Ten-year bonds have been moving within an 11.6 basis points range, one of the narrowest bands ever recorded, which reflects how stable the market has been. Morgan Stanley and Societe Generale are warning that the Federal Open Market Committee’s decision on interest rates, expected on Wednesday, will only “extend the stupor.”

Speaking of Wednesday’s FOMC meeting, here are some other things to keep an eye on this week:

• Constitutional change: The House will begin this week public hearings on the proposed constitutional amendments. The hearing will wrap up next week and are open to the media.
• Conferences and gatherings: The Portfolio Egypt conference takes place on Tuesday, the Green Building Conference gets underway on Wednesday and Planning Minister Hala El Said is guest speaker at AmCham’s monthly luncheon meeting on Thursday.
• Global macro: The US Fed will set interest rates on Wednesday, as we note above.

We have the details on all of the above and more in this morning’s Calendar section.

Are you in Dubai this week? Our friends at Mindsalike are bringing their networking event to DXB this Wednesday at Coco Lounge, according to an emailed statement (pdf). The gathering, a Cairo fixture for many, is meant to “bring together entrepreneurs to build powerful informal relationships with like minds — allowing them to meet, discuss challenges, share knowledge and build collaboration.” Tap or click here to register for the event.

Other things worth a moment of your time this morning:

• Calpers wants to double-down on private equity (not that we can expect any of that to flow to our corner of the world), but the proposal is proving controversial in some quarters. (WSJ)
• ESG has zero financial benefit for private infrastructure companies including utilities, airports and transport groups, according to recent research. (FT)
• Can the rally in US stocks and global oil prices continue? The Wall Street Journal reads the sheep’s entrails.
• Cult of the Dead Cow: Would-be US presidential candidate Beto O’Rourke was a teenage member of the hacker group Cult of the Dead Cow, which some credit for having created the term “hacktivism.” (Reuters)
• The ‘black box’ from the Ethiopian Airlines crash shows “clear similarities” to the Lion Air plane that went down in Indonesia last fall. (Reuters)

You have been warned: US boxer Mike Tyson is making his debut on the Egyptian silver screen starring with other one-time names including Egyptian actress Ruby and Lebanese singer Amar in the film “Hamlet Faron” (Pharaoh’s Campaign). Tyson is due to arrive in Egypt next week to shoot his scenes for the flick, which producers want to have in theaters for Eid Al-Fitr, Al Bawaba reports.

The Arab and African Youth Forum was still all over the airwaves last night, with shared footage appearing on most channels. Hona Al Asema’s Reham Ibrahim (watch, runtime: 07:55) spoke with Banque Misr Vice Chairman Akef El Maghraby, who noted young entrepreneurs as well as efforts to implement financial inclusion, especially for SMEs, featured heavily at the gathering.

An industrial complex in Luxor also earned some airtime on El Hekaya (watch, runtime: 08:16). The complex, one of 13 industrial zones that are being built across Egypt, will be home to some 240 projects and has created 600 jobs.

EGP hits two-year high against the USD: The EGP is continuing its seven-week rally against the greenback, hitting a two-year high of EGP 17.35 : USD 1 yesterday. The EGP was at 17.92 on 27 January. “You’re seeing most of the indicators improving,” Hany Farahat, senior economist at CI Capital, told Reuters. “Tourism, exports, substitution of natural gas imports with domestic production, remittances are at a peak, FDI is improving slightly.”

Currency gains are being supported by the central bank’s decision to end the FX foreign repatriation mechanism in December. “Once the repatriation mechanism was abolished, it meant that every single inflow coming into the country reflects directly on interbank liquidity,” Farahat said. “This, in tandem, should also reflect directly on EGP volatility against the USD.” The foreign repatriation mechanism was designed to reassure foreign investors by allowing them to repatriate their USD from the country at any point.

Egypt is in talks with unnamed foreign lenders for a USD 2 bn loan to fund new transport projects, Investment Minister Sahar Nasr said yesterday, according to a ministry statement (pdf). Nasr met with newly appointed Transport Minister Kamel El Wazir to discuss financing for the Transport Ministry’s planned infrastructure upgrades and other projects. Among the top priority projects is completing the development of Egypt’s railway, including the automation of signaling systems and the purchase of new locomotives. The World Bank had approved late last year a USD 3 bn loan to finance projects in the transport and other sectors, in addition to a separate USD 500 mn in loans for railway development projects.

Separately, Egypt is in negotiations with the World Bank for a USD 200 mn loan to fund welfare programs and the state’s new subsidy scheme, government sources told the domestic press. The bank offered Egypt a USD 500 mn loan to support its Takaful and Karama cash-subsidy programs at the end of last year.

EXCLUSIVE- Prototype of real estate appraisal system ready, process to wrap up in a year: Ain Shams University has completed a prototype of the digital system it will use to appraise Egyptian real estate, engineering professor and head of the real estate appraisal program Mohamed Salheen tells Enterprise. A model database of property prices should be ready and presented to Cabinet within a year, according to Salheen. The survey will be conducted using up-to-date methodologies and with the help of geographic coordinate systems to arrive at location-based values. The system is part of the proposed amendments to the Real Estate Tax Act, which are largely aimed at reducing real estate tax discrepancies.

Tax appraisal to take into account property age, proximity to public services: Each 10 years in the life of a property will qualify it for a 10% reduction in taxes, up to a maximum of 50%. The property’s accessibility and proximity to public services and facilities will also be taken into account, Salheen added.

FinMin to revisit sector-specific agreements once appraisal wraps up: Once the appraisal process is complete, the Finance Ministry will review agreements it had reached back in September and in August with the oil and tourism ministries for the tax treatment of properties in oil, gas, mining and tourism sectors. The agreements had originally proposed that taxes on properties in these industries be determined using investment / development costs as bases. The revision will ensure a consistent method, based on asset replacement costs, is used across all sectors. The ministry will also find a legal solution for the tax treatment of industrial land that is either idle or used by factories as storage facilities.

Egypt’s imports of Israeli gas delayed to mid-2019 due to pipeline doubts: Egypt will begin receiving its first shipments of Israeli gas in the middle of this year, two sources familiar with the matter told Bloomberg. Egypt’s East Gas originally expected trial shipments from Israel’s Tamar and Leviathan gas fields to begin this month, but the sources said that the pipeline still requires further maintenance. Petroleum Minister Tarek El Molla also told the CERAWeek energy conference in Houston last week that Egypt will start importing Israeli gas by mid-2019.

Background: East Gas, Noble Energy and Delek Drilling last year signed a USD 518 mn deal for a 39% stake in Ashkelon-Arish pipeline operator Eastern Mediterranean Gas (EMG), which was supposed to have paved the way for Egypt to begin importing an initial 100 mn scf/d in 1Q2019. In the time since, doubt has been raised over the capability of Israel’s domestic pipeline infrastructure to handle the quantity of gas agreed in last year’s USD 15 bn gas deal. The two countries began talks in January over the construction of a new subsea pipeline that would enable Israeli gas to flow directly to Egypt’s Idku facility, eliminating the need to expand Israel’s onshore infrastructure.

INVESTMENT WATCH- TCI Sanmar to invest USD 125 mn to expand Egypt business: India’s TCI Sanmar Chemicals is planning to invest USD 125 mn to expand its Port Said factory and double its production capacity to 400k tonnes of industrial chemical compounds, Chairman PS Jayaraman said. The company completed USD 280 mn-worth of expansions to the facility last year, Jayaraman added. The facility is specialized in the production of caustic soda, polyvinyl chloride, and ethylene. We also noted last year that Sanmar was on the lookout for a land plot in the Suez Canal Economic Zone to set up shop there.

Kuwait-based food delivery platform Carriage launched in Egypt last week, COO Bader Al-Ajeel tells MENAbytes. Carriage launched its alpha phase a month ago and has signed up around 600 restaurants in Cairo so far, according to Al-Ajeel.

Is the service entering an already-saturated market? “The startup faces stiff competition from local and international players who are already present in Egypt,” the website notes. Uber Eats, Otlob, Elmenus, Akelni and Glovo are just a few of the players already battling for delivery market share here in Egypt. Carriage says it will expand its services to more than food delivery, as it has done in other markets, to maintain a competitive edge.

Wait, there’s life outside Cairo? Marakez’s Mall of Tanta is set to open its doors in 3Q2019, according to a company press release (pdf). The mall will be home to a branch of supermarket operator Spinneys branch, among other retail outlets. Marakez is a subsidiary of Fawaz AlHokair Group. The Tanta facility will be the first venture beyond the capital for the Saudi-based owner of Cairo’s Mall of Arabia.

REGULATION WATCH- FRA approves bylaws for futures exchange: The Financial Regulatory Authority (FRA) approved the bylaws of a futures exchange and a preliminary template contract for the establishment of the legal entity that will house it, the market regulator said in a statement (pdf). The new bourse will be the day-to-day market operator for futures trading. The creation of a futures market comes after amendments to the executive regulations of the Capital Markets Act issued last July opened the door to the introduction of new financial instruments.

REGULATION WATCH- NUCA issues new regulations governing how land is allocated: The New Urban Communities Authority (NUCA) has approved a new regulatory framework for how land is allocated to investors for service and mixed-use projects, Housing Minister Assem El Gazzar said. Under the new regulations, NUCA will be required to allocate land based on investor preference and each city or town’s development priorities. A specialized committee will be mandated with determining the price of the land. Investors will also be required to submit feasibility and solvency studies with their land allocation requests and will be required to pay a 10% down payment for the land as proof of commitment. Investors who back out later will only get back half of the down payment.

EARNINGS WATCH- Cleopatra Hospitals Group reported a 168% y-o-y increase in net profit in 4Q2018 to EGP 90.2 mn, up from EGP 33.6 mn in 4Q2017, according to the company’s earnings release (pdf). Revenues for the quarter stood at EGP 394 mn, up 27% y-o-y from EGP 309.6 mn in the same period last year. Higher volumes and favorable pricing supported revenue and net profit growth as they “concluded a very successful 2018 with yet another quarter of strong top and bottom-line growth,” CEO Ahmed Ezzeldin said. “I’m also pleased to announce that the first of the two newly established polyclinics is now fully operational with the second expected to come online in the coming months,” Ezzeldin added.

Beltone Financial reported a net loss of EGP 82.4 mn in 2018, compared to a net profit of EGP 3.2 mn in 2017, according to a bourse filing. Revenues increased to about EGP 707 mn compared to EGP 696.7 mn a year earlier.

MOVES- Raya Contact Center has named its deputy chairman and CEO Reem Asaad (LinkedIn) to also head its UAE unit, the company said in a bourse filing (pdf).

EM equities will claw back their 2018 losses, says BlackRock: Emerging-market stocks will (as an asset class) recoup “most, if not all” of the losses they sustained in 2018, BlackRock’s Gordon Fraser told Bloomberg. Improving EM liquidity, driven by the US Federal Reserve’s pause on rate hikes — coupled with rate cuts by EM central banks and Chinese stimulus measures — bode well for emerging markets resuming their strong start to 2019 and making up for the rough second half of last year. “All the key challenges emerging markets had last year have been surmounted and the global liquidity has returned to emerging markets’ favor,” the fund manager said.

Not everyone is as optimistic: The bulge bracket banks aren’t yet sold, signaling instead that investors are getting cold feet about EM investment: Citibank said earlier this month that clients had begun pulling money from EM funds, citing “decline in the EUR and risk assets in general.” Bank of America Merrill Lynch also reported that EM equity funds saw net outflows last week. And then there’s China, which despite record amounts of economic stimulus, saw industrial output growth fall to 17-year lows and unemployment rise in January and February this year, causing the USD to rise against EM currencies. If Fraser is right that equities are “highly correlated” with currencies and bonds, a stronger USD (boosted by poor Chinese data) isn’t exactly great news for EM stocks.

It’s another quiet news morning for Egypt in the international press. Among the very few pieces worth a skim today:

• Another notch in the belt: Chinese state media organ Xinhua is bigging up its work in the new administrative capital as a “landmark” for the country’s Belt and Road Initiative.
• Whining about football: Egyptian Premier League Chairman Amer Hussein is complaining that Egypt is hosting the African Cup of Nations (AFCON) in the “hardest season in the history of Egyptian football,” in an interview with AFP.
• Rainbow Chili Peppers: Reports that security at the Red Hot Chili Peppers concert on Friday were checking for LGBT rainbow flags got some attention in the foreign press.
• Support for Bashir: Egypt’s concerns about lawlessness and the rise of Islamist militancy in Sudan is driving its support for President Omar Al Bashir, despite him having brought neither peace nor prosperity to his country, The National says.

El Sisi warns of terrorism, urges for infrastructure cooperation at Arab-African Youth Forum: Remarks made by President Abdel Fattah El Sisi on the sidelines of the Arab and African Youth Platform topped the front pages of all three state-owned newspapers this morning (Al Ahram | Al Gomhuria | Al Akhbar). The president stressed the importance of cooperating in infrastructure development with Arab and African neighbors, Al Ahram reported. El Sisi also warned of terrorism, corruption and internal conflict, describing them as the “traingle of danger,” Al Gomhuria highlighted.

Why have so many ancient Egyptian statues lost their noses? There are complex reasons behind the destruction of ancient Egyptian works, Julia Wolkoff writes for Artsy. Research by American archaeologist and Egyptologist Edward Bleiberg suggests that myriad “political, religious, personal and criminal motivations” formed the basis for those seemingly deliberate and largely consistent patterns of destruction. It certainly wasn’t all because of wear and tear, and surely Napoleon’s cannonball didn’t shoot them all. It was rather an ingrained culture of iconoclasm that resulted in their vandalism.

The vandals targeted the nose, ears, and left arm. Striking off a nose meant the statue ceases to breath, and therefore dies. Hammering away the ears meant it can no longer hear prayers. And in statues representing a human being making an offering to the gods, the left arm — which was most commonly used to make such offerings — was cut off. Other statuary was attacked for political reasons: Two powerful Egyptian queens, Hatshepsut and Nefertiti, had their legacies eroded as the vast wealth of their “imagistic and inscribed memory” posed threats to their successors. This aspect of Egypt’s history will be the main theme of a months-long exhibition, Striking Power: Iconoclasm in Ancient Egypt, set to kick off next week at the Pulitzer Arts Foundation in Missouri.

The market dynamics of sweet and sour crude: OPEC is under pressure fromcheap US “sweet” shale oil that is available in large quantities and easier to refine.The oil cartel, many of whose members produce “sour” oil that is harder to refine and is less available in the market, now has to decide whether to further extend their supply cuts and squeeze an already stressed market, Bloomberg tells us in this nice animated explainer (watch, runtime: 0:57).

Egypt will soon host a meeting of a committee to economic integration with the European Union, according to a Trade Ministry statement out following bilateral talks between Minister Amr Nassar and EU Ambassador to Egypt Ivan Surkos. The meetings will focus on increasing cooperation and investment in manufacturing, agriculture, trade and services. Nassar and Surkos touched on EU-Egypt cooperation in Africa, as well as potential investments in the Suez Canal Economic Zone, for which a dedicated forum is set to be held before the end of 2019.

Egypt and the UN successfully brokered a truce between Hamas and Israel following a flare-up in violence late Thursday night and early Friday morning, according to the Jerusalem Post. Violence reportedly broke out when two missiles were fired at Tel Aviv and nine at southern Israel from Gaza. The Israeli army retaliated by hitting 100 Hamas targets.

Egypt and the African Union (AU) will coordinate closely on African reconstruction and development projects during Egypt’s chairmanship of the AU, President Abdel Fattah El Sisi and AU Commission Chairman Moussa Faki agreed during a meeting yesterday, according to an Ittihadiya statement. During the meeting the leaders discussed deeper economic integration and cross-border cooperation among AU member states.

Sidi Kerir Petrochemicals’ (SIDPEC) new propylene and polypropylene plant in Alexandria will have a 70:30 debt-to-equity ratio, the company said in a EGX release (pdf). We reported last October that SIDPEC is in talks with local banks to arrange a USD 1.2 bn loan for the facility.

Italy’s Eni will by April have completed the construction of a gas treatment station for Zohr-produced gas in Port Said’s El Gameel region, which will connect to the Damietta liquefaction plant, an industry source told the domestic press. The Damietta liquefaction plant, of which Eni owns 26%, will be able to export 750 mn cf/d after the completion of the plant.

Siemens has signed a contract with Al Ezz Dekheila Steel Company in Alexandria to provide digital analytics and automation technology for its industrial assets, the German industrial conglomerate announced in a press release on Sunday.

Egyptians’ annual consumption of sugar has reached between 3.2 and 3.3 mn tonnes, making us “one of the most sugar-consuming countries,” Supply Minister Ali El Moselhy said yesterday, according to Reuters. Egypt produces some 2.2 mn tonnes of the white stuff, leaving a supply gap of around 1 mn tonnes.

Japanese-British firm Sumitomo Electric Wiring Systems Egypt has inaugurated two new USD 200 mn factories in Port Said freezone, according to an Investment Ministry statement. The statement provided few details on the project. The company is also set to complete soon a separate USD 200 mn facility in 6 October, on which it broke ground last year.

Marsa Alam International Airport on Sunday received the first flight from Milan since 2010, Chairman and Acting Director at Marsa Alam Tourism Development Adel Rady told Al Shorouk newspaper. Rady said the number of tourists visiting the Red Sea resort has begun recovering after a drop in recent years.

Nissan Egypt has begun talks with the government to outline the incentives it would like to see to invest in electric cars manufacturing, Chairman Kohei Maeda says. Maeda provided little further details, but added that the company is working closely with authorities to determine the “suitable structure” to use and recycle batteries.

Apex Africa was awarded a contract worth EUR 12 mn to provide buses to Niger, the company said in a statement (pdf). Apex will provide the buses in cooperation with MCV-Mercedes Egypt.

Al Tawfeek Leasing (AT Lease) will launch before year-end factoring and SME-targeted leasing operations, according to a press release (pdf). The company will relocate to larger headquarters as a prerequisite to obtaining the necessary licensing for the new activities, and in the process double its workforce. The company has been mulling the expansion for nearly one year. We had also reported last month that it is seeking EGP 1 bn in financing from banks this year to raise its available financing to EGP 4 bn.

GB Lease is in talks with banks to get an EGP 800 mn loan to increase liquidity and finance operations, Al Mal reports. GB Lease approached CIB, National Bank of Egypt, and Arab African International Bank for a loan with a term of 3-5 years.

Zulficar & Partners won this year’s annual football tournament between top law firms. This year’s edition, held over the weekend, marked the second title for Zulficar. The tournament saw 15 law firms field teams, including Matouk Bassiouny & Hennawy, White & Case, Zaki Hashem & Partners and Shalakany. EFG Hermes was also in attendance as a guest invitee.
 

Correction: 20 March, 2019

An earlier version of this article incorrectly said the tournament was organized solely by Zulficar & Partners. The organization of the event was a joint effort between law firms.

Wuzzuf founder becomes World Economic Forum young global leader: Ameer Sherif, founder and CEO of BasharSoft, the owner of recruitment platforms Wuzzuf (for white collar professionals) and Forasna (for blue collar staff), has joined the World Economic Forum’s Young Global Leader program, MENAbytes reports. Qalaa Holdings’ Hisham El Khazindar was once part of the YGL program, as were Mark Zuckerberg, Elon Musk, and Jack Ma. The news comes as Sherif and the founders of customer loyalty program Dsquaressaw their businesses chosen to become part of the Endeavor entrepreneurship program, according to an emailed statement (pdf).