Former president Morsi dies during court appearance

Former president Mohamed Morsi died yesterday, collapsing in court after speaking for some five minutes during his latest trial. He was subsequently declared dead in hospital. We have full coverage in this morning’s Speed Round, below.

There’s lots of banking news this morning coming out of the Seamless North Africa fintech and ecommerce conference, which kicked off yesterday. CBE governor Tarek Amer revealed new details on sales of United Bank and Banque du Caire. On the latter, Amer implied that the stake that will be sold in an initial public offering might be reach 40%, while also noting that United Bank has new prospective buyers. We have the rundown on this and more in this morning’s Speed Round, below.

It’s a tech-heavy week: The IDC CIO Summit 2019 for the Middle East, Africa and Turkey is taking place this afternoon at the Marriott Zamalek. The summit will kick off with a keynote speech by Communications and ICT Minister Amr Talaat, according to a press release (pdf). Finally, Cairo Technology Week will wrap up tomorrow as we approach the end of a week well spent by tech enthusiasts.

Non-tech events we’re keeping an eye on include Pharos’ annual investor conference (pdf), which will kick off in Hurghada tomorrow.

PSA- If you are regulated by GAFI, you must start uploading financials to its website: Companies regulated by the General Authority for Freezones and Investments (GAFI) will have to start uploading digital copies of their financial statements to the authority’s database starting 1 October, according to a decision published yesterday. Copies will need to be uploaded three months after the end of each fiscal year.

President Abdelfattah El Sisi is on the road, having arrived yesterday in Belarus yesterday for a visit in which trade talks will feature heavily, according to a foreign ministry statement. The president next heads to Romania, where he will meet with Klaus Iohannis and legislators before giving a lecture Bucharest University of Economic Studies on Cairo-Bucharest relations. El Sisi had previously been expected to visit Mozambique to attend the US-Africa Business summit, which runs through Friday.

The House of Representatives general assembly is off this week. It will be back next week to debate the FY2019-2020 budget. Committee-level meetings and hearings continue in the meantime.

Korea’s deputy foreign minister for economic affairs will be in town on 18-21 June to talk trade and investment, according to an emailed statement (pdf).

Three days to go until Afcon 2019: Our readers need no reminder on which tournament is taking place this Friday. To mark the occasion, Reuters has put out profiles of the Egypt Afcon team that won't be hugely informative for die-hard Pharaohs fans (we’re guessing that’s most of you), but with the tournament drawing nearer it’s a useful guide for the uninitiated.

Our friends at Edita are proud sponsors of Afcon 2019, the company said in a press release (pdf).

Fed meets today: Further afield, emerging markets including Egypt holding their collective breath as the US Federal Open Market Committee begins today its two-day policy meeting to review the interest rate. The meeting comes as emerging markets are buffeted by the fallout from the trade war between China and the US. Central banks across EM have been lowering interest rates to stimulate their economies, with a hope that the Fed will cut interest rates to counter a rising USD.

What can we expect from the meeting? Both Fed Chairman Jay Powell and European Central Bank President Mario Draghi have “sharply” hauled down rate expectations, Deloitte said in its recent Global Economy in Charts briefing. Powell’s recent statement that the Fed is ready to act has markets expecting at least two rate cuts. Dragi has also signalled concern about slowing growth.

The Fed’s interest rate decision comes as global growth is expected to slow down to 3.3% this year from 3.6% in 2018. But the slowdown will be “concentrated in developed markets and China,” Deloitte says: Emerging markets are getting the better end of the stick, with growth expected to only slightly slow down by 0.1 ppt to 4.5%. Developed markets, however, will take a bigger hit to growth as they may see their economies grow at a 1.8% rate this year, down from the already faint 2.2% in 2018.

Key highlights from the Deloitte briefing:

• Chinese retail sales remain weak. And a key industrial indicator in the USA — the purchasing managers’ index — is at a two-year low;
• Escalating trade tensions between the two weighing in on the volume of global exports;
• The EU is expected to grow at its slowest pace in six years with Germany suffering from trade contraction, and Italy forecast to barely grow;
• UK has plunged into uncertainty with the whole Brexit thing.

Why we care about interest rates in the US and in emerging markets: The stability and relative strength of the EGP rests rather heavily at the moment on foreign holdings of Egyptian debt, right? And interest rates in Egypt are rather high right now. If the fed cuts rates — and if EM outside Egypt continue to do the same — our debt looks that much more attractive. While rate hikes in the United States pull money back into the US in search of safer returns — rate cuts often have the opposite effect. Similarly, there’s competition in EM for foreign capital wherein the higher interest rate (with relatively lower risk) tends to get all the attention.

In other international headlines worth knowing about this morning:

• The Iran nuclear agreement is on the ropes as looks set toexceed agreed-upon uranium stockpile limits on 27 June. (Associated Press)
• The US will send another 1,000 troops to the Middle East for “defensive purposes,” acting Secretary of Defense Pat Shanahan said yesterday. (Reuters | Bloomberg)
• Mixed messages on Trump Palestine workshop: Israeli government officials will not be invited to attend the US-led workshop on Palestinian economic development in Bahrain next week, US officials have said, contradicting Israel’s announcement yesterday that it would send a delegation to the gathering. (Axios)

It was a quiet night for business on the nation’s airwaves as the nation’s talk show hosts hopscotched across a range of issues including the death of Mohamed Morsi and the kickoff of President Abdelfattah El Sisi’s visit to Europe. We have more on the Morsi coverage in this morning’s Speed Round, below.

El Sisi kicks off Europe tour with Belarus visit: Assal also covered President Abdel Fattah El Sisi’s Europe tour, which kicked off yesterday with a visit to Belarus and will conclude later this week in Romania, (watch, runtime: 03:03). The president is expected to hold bilateral meetings with the leaders of both countries to discuss boosting economic cooperation.

Egypt Ambassador to Belarus Ehab Nasr stressed the importance of the Belarus visit to Masaa DMC’s Eman El Hosary (watch, runtime: 03:38), highlighting that it marks the first since the country became independent. Nasr said ties between the two countries have become stronger in recent years, especially in the fields of tourism and trade.

Former president Mohamed Morsi is dead after a heart attack in court: Former president Mohamed Morsi, 67, died yesterday after suffering a heart attack during a court appearance in an espionage trial, state media reported. Morsi, a senior Muslim Brotherhood member who was elected president after throwing his name in the hat as a “spare” to the Ikhwan’s preferred candidate, reportedly lost consciousness during the hearing and was pronounced dead after being taken to hospital. He had been speaking for approximately five minutes at the time of his collapse.

There was no “evidence of marks or injuries” on Morsi’s body, but a full autopsy will be conducted and court footage examined, Prosecutor General Nabil Sadek said in a statement (English translation) late yesterday, confirming that he had ordered a full investigation opened. Investigators have requested Morsi’s medical file and will prepare a report on his death.

What was he on trial for, anyway? Morsi was in court yesterday on espionage charges in a case related to Hamas. At the time of his death, he was also serving a 20-year prison sentence for the killing of protesters in 2012 and 25 years in another espionage case related to Qatar. A earlier death sentence in the so-called “prison-break” case of 2011 had been overturned.

The Muslim Brotherhood is calling for a “mass funeral”: The Ikhwan, still going on in the language of revolution, described Morsi’s death as “full-fledged murder” in a statement on its website that called for mass turnout at a funeral in Egypt. The Ikhwan is also calling for protests at Egyptian embassies abroad.

No pilgrimage site: Morsi was buried in east Cairo, Sky News Arabia reported this morning, citing unnamed security officials. Authorities had reportedly refused to allow Morsi to be buried in his family’s plot, Abdullah Mohamed Morsi told Reuters. The AFP had reported that Morsi would be buried in Nasr City.

Reaction from international political figures has been muted — no major western figure had commented on the death as of dispatch time this morning.

But the usual suspects are bellowing, naturally enough. Turkish President Recep Tayyip Erdogan, an ally of Morsi, called him a “martyred brother” and offered condolences to the people of Egypt. Qatar’s Tamim bin Hamad, another Ikhwan supporter, turned to Twitter to offer “brotherly” condolences to “the people of Egypt.” Hamas, meanwhile, praised Morsi for his “unforgettable and brave” policies toward Gaza during his time in office.

Amnesty International has called for an “immediate investigation” into Morsi’s death, saying the incident raises concerns on his treatment in custody. More on Twitter and on the organization's website.

Grasping at straws: A US professor positioned as a former advisor to the State Department on political Islam told the NYT that Morsi’s death “was resonating beyond the Brotherhood with other Egyptians who voted for him or ‘have concerns about the current government’s human rights record.’”

The story is everywhere in the foreign press: The Wall Street Journal describes Morsi as a “controversial figure” whose rise to power epitomized Egypt’s brief period of political freedom. Bloomberg meanwhile says the rule of the “bespectacled and portly Muslim Brotherhood foot-soldier” was defined by “dangerous polarization.” The BBC’s Lyse Doucet warned that his death is “certain to inflame passions among his supporters and allies in Egypt and beyond.”

Read all about it in the New York Times I Wall Street Journal I Washington Post I Bloomberg I Financial Times I The Guardian I AP I BBC (news and obit)| CNN (here and here) | Reuters.

Here at home, coverage reads more like a minor police procedural as the domestic press dissects official statements from prosecutors and reports citing unnamed sources. See examples in Al-Ahram and Al-Akhbar.

Morsi got coverage on all of the major talk shows last night. Amr Adib made Morsi’s death the centerpiece of his show (watch, runtime: 4:08). Al Hayah Al Youm’s Khaled Abu Bakr (watch, runtime: 5:56) chimed in, and Masaa DMC’s Eman El Hosary (watch, runtime: 1:56) gave the Ikhwani short shrift, limiting herself to reading out the prosecutor general’s statement (above).

Morsi was elected president in 2012, narrowly defeating former Air Force commander Ahmed Shafiq in a tense run-off election. His rule was marred by political and economic turbulence. Power outages and gasoline shortages were common, and a controversial declaration that he was essentially above the law provoked large demonstrations against his rule. He was removed from office by the military in July 2013 after mns took to the streets to demand his ouster.

IPO WATCH- Banque du Caire IPO to be larger than previously expected? The CBE could offer more of Banque du Caire (BdC) for sale in an initial public offering than previously expected, according to statements made by CBE governor Tarek Amer at the Seamless North Africa Conference reported by Al Mal. He reportedly said that the CBE was looking to sell a 30-40% stake in the bank. Amer previously said that the CBE was planning to offer a 20-30% stake. BdC was expecting to raise USD 300-400 mn from a 20-30% stake sale. Chairman and CEO Tarek Fayed had told us in an exclusive interview that BdC is internally ready for the IPO and is awaiting a decision by stakeholders and regulators.

The CBE has received new bids from international institutions interested in buying United Bank and is waiting for more before it makes a decision, Masrawy quotes Amer as saying. The CBE governor said no decision has been made on a bid made by an unnamed US-based investment fund. Amer announced back in February that a US financial institution had made an offer to acquire the bank and then said in May that the transaction would be completed in three months’ time.

The governor made no mention yesterday of listing United Bank on the EGX. Amer had told the domestic press last month that it is also possible that a non-controlling stake in United Bank could be offered on the EGX. The central bank owns 99.9% of the bank’s shares, having created the institution through the merger of a number of smaller institutions.

United bank is definitely looking to shore up its capital adequacy: United Bank Chairman Ashraf El Kady told the local press that the lender is looking to raise its capital to conform with new capital requirements under the Banking Act. Unnamed CBE officials said last month that domestic banks could see their capital requirements rise tenfold to EGP 5 bn, prompting National Bank of Egypt Deputy Chairman Yehia Abouel Fotouh to state that is likely we will see mergers of smaller banks. Banks will have three years in which to raise the required capital.

The CBE also signed two MoUs yesterday with the Social Solidarity Ministry and the Financial Regulatory Authority to help boost support the fintech industry, MENA reported. No further information was available at dispatch time this morning.

Also from the conference: Egyptian fintech startups Paynas and Digified— part of accelerator Falak Startups — are among the five North African startup finalists selected for the Seamless North Africa pitch-off taking place this afternoon at the Nile Ritz Carlton. They are the only finalists representing Egypt. Paynas is a cloud-based platform that offers banking services and HR features to small businesses. Digified allows instant identity verification and data extraction from official documents in Arabic using machine learning technology.

M&A WATCH- Tie-up between OCI NV and ADNOC will create the largest fertilizer producer in MENA: Abu Dhabi National Oil Company (ADNOC) has agreed to merge its fertilizers business into OCI NV’s nitrogen fertilizers production platform in the Middle East and North Africa, creating the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region, OCI NV said in a statement (pdf). The new Abu Dhabi-based entity will have a production capacity of 5 mn tonnes of urea and 1.5 mn tonnes of ammonia. Annual revenues for the combined entity are USD 1.74 bn, based on 2018 pro forma figures. OCI will own 58% of the JV and ADNOC 42%. The transaction is expected to close in 3Q2019, subject to legal and regulatory conditions.

So what assets are merging, exactly? OCI’s MENA assets include Egyptian Fertilizer Company (EFC), a 60% stake in Egypt Basic Industries Corporation (EBIC), a 51% stake in Sorfert in Algeria and a global trading platform based in the UAE. ADNOC Fertilizers operates two plants in Ruwais in the UAE.

OCI boss Nassef Sawiris will also become CEO of the new entity, while UAE Minister of State and CEO of ADNOC Sultan Ahmed Al Jaber will be chairman.

Advisors: J.P. Morgan acted as financial advisor and Cleary Gottlieb Steen & Hamilton LLP as legal counsel to OCI NV. Citi acted as financial advisor and Shearman & Sterling as legal counsel to ADNOC.

The story is getting traction in the foreign press: FT | CNBC | The National

M&A WATCH- Ebtikar-led consortium completes acquisition of ODH’s 87% stake in Tamweel Group: A consortium of funds including B Investments’ Ebtikar for Financial Investment, TCV1, and Acquire for Investment has completed its acquisition of Orascom Development Egypt (ODH)’s 87% stake in Tamweel Group, Ebtikar said in a statement (pdf). The funds have received all the required approvals and the share transfer has been completed. The news comes more than a year after ODH first announced the transaction. Ebtikar’s chairman, Aladdin Saba, described the acquisition as “an integral part of our growth strategy.” The stake sale has been in the making since the second half of 2016 (pdf), when ODH announced that it would offload the assets in order to pay off some of its EGP 1 bn debt burden.

About Tamweel: Tamweel Group is made up of four companies operating in mortgage finance, factoring, leasing, collection and insurance brokerage. The company is valued at EGP 360 mn.

Advisors: EFG Hermes Investment Banking acted sell-side financial advisor on the transaction. Zaki Hashem & Partners advised Ebtikar and TCV on the acquisition, while Taha, Moussa & Sabahi Law Firm represented Acquire.

INVESTMENT WATCH- GSK inaugurates new EGP 20 mn line: GlaxoSmithKline (GSK) Consumer Healthcare inaugurated a EGP 20 mn production line yesterday, according to an Investment Ministry statement (pdf). The company will now have 11 production lines at its Giza facility, allowing it to produce 90 million boxes of the pain med and anti-inflammatory Voltaren Emulgel.

GSK plans to invest EGP 100 mn this year: The UK-based company will invest a total of EGP 100 mn in Egypt this year, the ministry statement noted. This will bring its total investments in the country to EGP 1.1 bn. GSK will be investing in developing more production lines and ensuring its brands’ availability, North Africa General Manager Nabil Besri said (pdf).

More British business expected to come: UK-based health companies are planning to increase their investments under an “Egyptian-British plan” for the sector, British Ambassador Sir Geoffrey Adams said. “Britain has an ambitious plan for health care in Egypt,” Adams added without elaborating further.

Ministry explains decision to scrap former Trade Minister Nassar’s car assembly policy: Trade and Industry Minister Amr Nassar’s decision to scrap of former minister Tarek Kabil’s policy to increase the percentage of local content in domestically assembled cars is meant to give assemblers breathing room until a new set of sector incentives take hold, the ministry said in a statement (pdf). The new requirements would have been difficult for many assemblers to meet, and their suspension will provide them an opportunity to make new investments before a revised policy is put in place.

New incentives: We noted yesterday that the government is set to introduce up to 100% in custom discounts on automotive components as part of a fresh bid to spur domestic manufacturing and assembly.

What the ministry is saying is: Let’s start with a clean slate. The Kabil policy was planned to come alongside a number of other regulations that never materialized. This made it necessary to review industry regulations and align them with where policy is headed, the statement reads.

A reference to the automotive directive? Nassar was quoted by the press late last year as saying “there’s nothing called the automotive directive in most countries.” The minister’s statement downplayed the now-forgone plan that would have given incentives to local assemblers to move further up the value chain into manufacturing in return for a measure of protection against EU, Moroccan and Turkish imports. The plan has been in the works by successive government for years, but ended up in the shredder. It was sharply opposed by Egypt’s EU trade partners in favor of the policy that is now coming into fruition.

EFG Hermes once again tops frontier market rankings, is second in MENA, in 2019 Extel Survey: EFG Hermes has been voted number one frontier market brokerage firm for the second year running and remains the second-highest ranked brokerage firm in the MENA region, according to the 2019 Extel ranking of research provided by brokerage houses. Over 14k financial professionals at almost 5k firms (over 3,300 on the buy side) cast votes in this year’s survey worldwide.

Six individual EFG Hermes team members ranked in the top 10 of the MENA and frontier regional analyst rankings, including our friends Nada Amin, Hatem Alaa, Mohamed Abu Basha and Elena Sanchez-Cabezudo in MENA and Kato Mukuru and Ronak Gadhia in frontier. Sruti Patel and Muathi Kilonzo from the sales team featured in the top 10 of the frontier survey. EFG Hermes was also recently named the leading Africa Equities House by South Africa’s Financial Mail for the second year running, the company said. You can read all about the ranking here (pdf).

MOVES- Sherif Ayoub (LinkedIn) has been appointed chief financial officer of the Arab Petroleum Investments Corporation (Apicorp), the company said in a statement (pdf). Ayoub, an Egyptian, joined Apicorp from the Islamic Development Bank (ISDB), where he oversaw policy priorities and operations related to treasury, investment, financial control, budget, performance and risk management. He previously served as the assistant secretary general at the Islamic Financial Services Board (IFSB) and has worked with A.T. Kearney, the US government, the United Nations, and the World Bank during his career.

The death of Mohamed Morsi is dominating the headlines in the foreign press this morning: We have the full breakdown in this morning’s Speed Round, above.

Elsewhere: the Chinese charge d’affaires in Cairo is talking-up Huawei’s ability to help Egypt develop its tech industry, Xinhua says.

El Sisi in Belarus and Romania to talk economic cooperation, strengthening ties: President Abdel Fattah El Sisi’s Belarus visit topped the front pages of the government dailies this morning (Al Ahram | Al Gomhuria).

The Salvador Mundi has finally been located — floating off the coast of Sharm El Sheikh: The whereabouts of Leonardo da Vinci’s 16th century masterpiece has been a mystery since it was sold at an auction for USD 450 mn in 2017. According to new intel, the painting is currently floating in the Red Sea aboard Saudi crown prince Mohamed bin Salman’s megayacht. The painting will reportedly remain on the vessel until the Saudis complete a planned cultural hub in the Al Ula region. This Bloomberg video has more (watch, runtime: 1:05).

Japanese funding for children’s hospital: The Japanese International Cooperation Agency (JICA) will provide USD 18 mn for the expansion of the Abu El Rish children hospital in Cairo, the Investment Ministry said in a statement. JICA had recently promised a USD 250 mn loan to help finance the state’s universal healthcare plan, and said it is willing to take part in funding the construction of the hospitals and centers.

The government is planning to establish two logistics centers for dates and citrus fruits in El Wadi El Gedeed, the Supply Ministry’s Internal Trade Development Authority (ITDA) head Ibrahim Ashmawy said. The centers are expected to come at a combined investment cost of EGP 3 bn.

Heidelberg Cement subsidiary Tourah Cement has suspended production and could resort to liquidation due to financial distress caused by oversupply in the market, Managing Director Jose Maria Magrina said last week in a message to employees seen by Reuters. The company said estimated consumption during the current year will end at about 50 mn tonnes at a time when competitors operating at full capacity were producing about 85 mn tonnes. “This extra capacity is more than the total consumption in one year of countries like Italy, Spain, Morocco or South Africa,” Magrina said. The company’s accumulated debt stands at EGP 800 mn.

Sharm El Sheikh’s revenue per available room (RevPAR) is expected to grow 33% in 2019 ahead of Hurghada (29%), Alexandria (25%) and Cairo (11%), Colliers International said in its MENA Hotel Forecasts reports (pdf). Sharm is still lagging behind other cities as far as occupancy rates are concerned, with a rate of 62%. Alexandria is set to have the highest occupancy rates in 2019 with a rate of about 84%, followed by Cairo (79%), and Hurghada (69%).

Six Egyptians have made Financial News’ 50 Most Influential Women in Middle East Finance list:

• Noha El Ghazaly, head of investment banking at Pharos;
• Mona Zulficar, chairwoman of EFG Hermes and founding partner of Zulficar & Partners;
• Yasmin Al Gharbawie, general counsel at Qalaa Holdings
• Maha Heba EnayetAlla, Banque Misr’s head of strategy;
• Mervat Zohdy Soltan, chair and CEO of the Export Development Bank of Egypt,
• Soha Ali, JPMorgan’s Egypt and North Africa country head.