New healthcare system could offer private sector care for 20% less

The Americans are coming: Economic reform has made Egypt more attractive to US investors, US Chamber of Commerce Executive VP Myron Brilliant told Prime Minister Moustafa Madbouly during a meeting yesterday, according to a cabinet statement. Companies are particularly looking to invest in Egypt’s energy, health and digital sectors, he said.

We’ll also be treated to a visit by US Secretary of Energy Rick Perry before the month is out, as we mentioned yesterday. The man overseeing the spread of US “freedom gas” to all corners of the globe will be in town to address an AmCham event.

Madbouly also met with Emirati businessman Jamal Al Ghurair, who said his Al Ghurair Group is looking to build a seed storage facility and a river transport project in Damietta, the cabinet said in a separate statement without providing further details.

IMF acting head warns of “self-inflicted wounds”: The IMF’s acting managing director, David Lipton, told CNBC that countries must work to solve current tensions in trade and technology to avoid “self-inflicted wounds” to the global economy (watch, runtime: 03:11). This is particularly important at a time when Europe has limited monetary and fiscal maneuverability to cope with a recession. Global trade growth fell to a seven-year low of 1% in the first quarter of 2019 and investment has slowed, raising growth concerns in the eurozone

And speaking of the IMF: Christine Lagarde has officially submitted her resignation from her position as the fund’s managing director following her nomination as the next president of the European Central Bank, according to an IMF statement. The resignation, which comes into effect on 12 September, “will expedite the selection process” for Lagarde’s successor, the statement says. A number of names have cropped up in the list of Lagarde’s potential successors, including Allianz chief economic advisor Mohamed El Erian, outgoing Bank of England Governor Mark Carney, and the former governor of the Indian central bank Raghuram Rajan.

Venture capital mega-round funding is still in vogue — and it’s delaying IPOs: The number of funding rounds of USD 100 mn or more reached record highs in 2Q2019, according to a CB Insights and PwC report. These “mega-rounds” constituted over half of the USD 28.7 bn total raised over the quarter, representing a 10% increase in funding from 1Q2019.

Everyone wants in on fintech: Much of the funding was directed towards fintech startups, which attracted USD 5.1 bn last quarter, despite seeing 38 fewer agreements than in 1Q2019. The five largest fintech fundraising rounds in 2Q 2019 each totaled at least USD 300 mn. The result? Companies are staying private for longer, with only three fintech startups listing on the stock market in 2018.

Recep Tayyip Erdogan vs. the World: Two days after inviting US sanctions for purchasing Russian missile systems, Turkey is now facing punitive measures by the Europeans. Bloomberg reports that EU foreign ministers agreed yesterday to cut off funds and high-level communication with the Turkish government after it ignored demands to halt natural gas exploration in Cypriot waters.

Turkey’s response? “Bite me.” EU sanctions “will not impact our determination in any way to carry on with hydrocarbon activities in the eastern Mediterranean,” the Foreign Ministry said, according to Bloomberg. EU measures targeting Turkish drilling companies may not be far away.

Are we really this unhealthy?

• Egypt has the world’s highest prevalence of Huntington’s Disease,according to a new report. That’s double the rate of Europe and 11 times that of the US.
• Danger: Salad. British government health agency has issued new advice to people traveling to Egypt after several people returned recently from Hurghada with E. coli.

US Senate to Facebook: We can’t trust you with your crypto toy: Facebook’s trustworthiness was brought under questioning at a US Senate hearing on its plans to launch the Libra cryptocurrency, reports the Wall Street Journal. Senators grilled Libra cofounder David Marcus, who testified during the hearing, referring to the social media monolith’s repeated betrayal of public trust as proof it is unfit to operate its own digital currency.

Bitcoin feels the pain: Bitcoin’s has dipped to well below the USD 10k mark, losing 25% of its value in three weeks as the Libra announcement fueled fears of a global crackdown on cryptocurrencies. Financial regulators have from day one showed signs of unease at the prospect of digital money existing alongside fiats.

Worth a read during your commute this morning:

• Startup success isn’t always what it’s cracked up to be: Studies show that personality traits shared by many successful entrepreneurs also leave them vulnerable to mental health issues. (WSJ)
• Our workplaces should be restructured to allow for deep focus and concentration, rather than the “hyperactive hivemind” of constant interaction and multitasking, according to computer science professor Cal Newport. (BBC)
• Electric airplanes will soon take to the skies: Startups and manufacturers that are retrofitting existing airplane models — substituting combustion engines for electric motors — could have them flight-ready as early as the end of 2021. (WSJ)

PSA- Nestlé has started producing a new dark chocolate that has no added sugar, Bloomberg reports, in some good news for the health-conscious chocolate lovers among us.

The World Bank’s release of the Egyptian Economy Observatory report caught the attention of Al Hayah Al Youm’s Lobna Assal (watch, runtime: 14:51). Assal phoned in Ahram Editor-in-Chief Khalifa Adham, who said that for the first time in over ten years, economic growth was heavily driven by the private sector and gross investment. We have chapter and verse on the report in this morning’s Speed Round, below.

On Hona Al Asema’s radar: Bloomberg’s most recent testament to Egypt’s economic prowess, in contrast to Nigeria, the key points of which we covered yesterday (watch, runtime: 1:39).

The Emirati sports authority’s Egypt-born advisor Mohammad Fadlallah thinks quite highly of sports, telling Masaa DMC’s Osama Kamal that investing in sports could lead to “great economic gains,” provided the right strategy is in place. Egypt “must believe” in the potential impact of sports on national income, Fadlallah added (watch, runtime: 2:44).

EXCLUSIVE- Prices of services under the new healthcare system to be 20% less than market prices: Private sector hospitals and clinics that have signed on to provide services under the new healthcare system could be offering their services at a 20% discount from the average market price under the system’s new pricing scheme that has been drawn up by a government committee, Assistant Finance Minister Mai Farid tells Enterprise. Farid added that would necessarily apply to prices of “specialized” treatments and operations, though she did not elaborate on which procedures would be exempt from providing the discount. She acknowledged the possibility that some of these medical procedures may not even see a discount.

Background: Her statements come as the Finance Ministry announced the broad strokes of how private sector healthcare providers can join the new system set up by the Universal Healthcare Act. The government will contract out healthcare services to the private sector hospitals, who must abide by a pricing scheme that is being set up by the government committee.

A bid to attract private service providers to the new system: Reports from last year had indicated that the government was considering a discount of 40% on prices offered by private sector hospitals that sign up for the healthcare system. Farid tells us that these have been cut at the behest of private sector operators who were invited to sit on the committee that is drawing up the prices. One third of the members of the committee setting up the pricing for the system were representatives of the private sector.

Egypt eyes pricing crude at USD 64-68 in new hedging contract: Crude oil prices will be set at USD 64-68 per bbl in the government’s fuel hedging contracts with international banks, which are due to be renewed soon for the new fiscal year, an unnamed government source estimated, according to Al Mal. Finance Minister Mohamed Maait confirmed earlier this month that the government is planning to hedge against rising oil prices for the second consecutive year, having signed contracts last year with JPMorgan and Citibank. The minister’s confirmation came following press statements that his ministry and the oil ministry have started renegotiating the USD 70/bbl price they had agreed on in the contract. Hedging contracts typically allow for a revision of the crude price on a quarterly basis, the source said.

The contract saw hedging take place in FY2018-2019 at USD 70 per bbl: Despite crude hovering below USD 70 for a big part of the fiscal year, the government didn’t incur “significant losses” from hedging during the last fiscal year, the source said. He added that the hedging from last fiscal year’s contracts remains in place until the agreements are renewed. Crude indices are forecast to fluctuate between USD 65-70 this fiscal year, according to predictions cited by the newspaper.

Why is Egypt hedging? A Bloomberg analysis last year showed that every USD 1 increase above a benchmark price used by the state in annual budgeting added EGP 4 bn (USD 222 mn) to annual spending. This year’s budget uses a benchmark price of USD 68/bbl.

We can add Egypt to the growing list of countries that prove devaluation isn’t always a panacea for export growth: A few days ago we covered new research from the Bank of International Settlements and the Financial Times that helps to explain why, contrary to conventional thinking, devaluation is not always an easy fix for kick-starting sluggish export growth. At first glance, Egypt appears to be somewhat of a poster child for classical economics: The EGP lost over 10% of its value against the USD in 2016 and within two years exports had increased by almost a fifth, becoming the largest contributor to GDP growth. But while Egypt may be posting impressive export figures, these are mainly due to the country’s ongoing petro-renaissance. Non-oil exports, on the other hand, have seen little benefit from the float. A new World Bank report (pdf) helps to explain why this has been the case.

We have product issues: The bulk of Egypt’s non-oil exports are made up of low-value-added or traditional products. The country has been successful in expanding the number of products it exports, but the largest of these have mainly been in areas where the country does not have a comparative international advantage. And while Egypt’s competitiveness has been growing in some products, many of these — such as cotton, fertilizers, and tobacco — are seeing a decline in global demand.

We’re not sufficiently integrated into the regional economy: Despite our advantageous geographical location, Egypt is currently under-trading with 63% of destinations and at the same time over-trading with 20% of its markets. The product figures read a little better, with 53% of exports being under-traded and 13% over-traded — although some of the under-traded products are ones in which Egypt has a comparative advantage, such as textiles and fertilizers.

Trade barriers remain problematic despite significant improvements: While tariffs on the manufacturing sector have been significantly liberalized, primary products remain protected despite a relative relaxation of tariffs over the past decade. Heavy customs and trade regulations impose intensive documentation requirements, high clearance costs, and long, complex procedures.

Our connectivity could be better: Physical connectivity to markets is weak due to limited domestic transport infrastructure. Almost all exported goods are transported domestically via road, which is inefficient and wasteful in comparison to rail. And in the most recent Logistics Performance Index, Egypt underperforms on customs, tracking and tracing, increasing the cost and unreliability of import and export supply chains.

What can we do? The report suggests that we start by tapping new export sectors and markets with a special focus on higher value-added and tech products — incentives offered by the government could go a long way in encouraging producers to get on board with that. The World Bank also suggested that Egypt start investing in research and technology development to better compete with other countries.

A warning to real estate developers: Increasing property prices in response to rising fuel costs risks weakening demand and hitting sales, Sara Maher, equity analyst at Shuaa Securities, wrote in a note. The impact of the subsidy cuts is already reducing consumer purchasing power, and passing the added cost burden of developers onto prospective homebuyers will only make it more challenging for low and medium earners to afford property.

Having said that: Buyers in the upper echelons of the pay scale will be less affected by the rising cost of living, and are unlikely to be swayed should property prices increase.

Developers are unlikely to see their input costs rise: The decline in steel and cement prices over the past year will help to soften the blow of higher fuel costs, making it unlikely that developers raise their prices, Maher wrote. However, some companies have said that they will wait to assess how the subsidy cuts will affect their costs before making a decision about pricing.

Watch prices in new developments: Although Shuaa is confident that developers will ultimately not want to risk raising prices, it believes that any increases will be applied to new projects and phases. Sales in the primary market will “most definitely” fall if this happens, Maher says, and smaller companies may eventually be forced to shut up shop.

IPO WATCH- Fawry roadshow to kick off Sunday: EFG Hermes is kicking off a roadshow for local asset managers this Sunday for the upcoming Fawry IPO, a source close to the matter told the press. A roadshow for UAE and London-based investors is set to begin later in the week. Conference calls with other GCC, Europe, and South Africa-based investors will also be held.

IPO could go to market in early August: EFG could pull the trigger on the IPO, the size of which remains undisclosed, at the beginning of next month, the source said. Fawry’s debut share price will be determined from the get-go, rather than through a book building process, according to the source.

Background: We picked up reports last week suggesting that the e-payments platform could sell 45% of its shares in its EGX debut mid-next month. The offering could attract proceeds between EGP 2 and 2.5 bn, potentially making it the largest Egypt has seen since Emaar Misr in 2015.

EBRD committed to investing over EUR 1 bn in Egypt this year, looking to boost private equity portfolio: The European Bank for Reconstruction and Development (EBRD) is committed to investing north of EUR 1 bn in Egypt in 2019, including buying into companies in the state privatization program, Managing Director for the Southern and Eastern Mediterranean Janet Heckman tells Reuters. EBRD economist Rafik Selim said the bank is allocating EUR 1.5 bn in funding for Egypt this year, according to the local press. According to Heckman, the bank has its eye on the Alexandria Container and Cargo Handling Company (ACCH) secondary offering as part of its plans to expand its private equity portfolio in Egypt.

“We continue to be quite bullish and optimistic about Egypt … it’s a big country, almost 100 mn people and at the same time it’s greatly positioned in terms of export opportunities, which I think have been highly underdeveloped,” Heckman told the newswire. The bank has primarily been investing in Egypt’s transport sector, but has also made significant investments in local private sector companies looking to expand their operations, Heckman told us in December. EBRD President Sir Suma Chakrabarti had also said in December that the bank is planning to commit up to EUR 2.5 bn-worth of projects in Egypt over the next two years.

Egypt’s interest rate could fall to 14.75% in one year’s time, Trading Economics (TE) said in a forecast picked up by Ahram Online showed. The rate could stand at 13.75% in 2020, predicts TE, which compiles economic and financial indicators. The Central Bank of Egypt’s Monetary Policy Committee left the overnight deposit rate unchanged at 15.75% at its meeting last Thursday, citing the recent subsidy cuts as a key consideration. Most economists we polled ahead of the meeting did not expect the central bank to make a move until 4Q2019. But expectations changed a little after fresh data later in the week showed that inflation hit a three-year low of 9.4%, leading some to expect that cuts could come earlier.

Foreign holdings in Egyptian treasuries stood at USD 16.6 bn at the end of May, up from USD 16 bn at the end of April, according to the CBE’s monthly bulletin (pdf). CBE board member Fakhry El Fekky had told us in June that the figure had risen above USD 17 bn. Egypt has seen foreign appetite for its securities recover since the beginning of this year after a rough 2018. CBE data (pdf) shows that foreign holdings dropped by almost half to USD 11.5 bn in December, down from USD 21.2 bn in January.

Banks could be “left behind” as e-money poised to eclipse traditional currency -IMF: Banks will need to evolve or run the risk of being “left behind” by e-banking solutions offered by big tech companies, according to an IMF report (pdf). The fund predicts that e-money — a means of digitally storing regular money at the same value — is set to undergo a rapid rise in popularity, perhaps surpassing the use of cash and bank deposits.

In some countries e-money is already king: In Kenya, 90% of people over age 14 pay with M-Pesa, while in China the value of e-money transactions with WeChat Pay, Alipay and others exceed those of worldwide of Visa and Mastercard combined.

What will the impact on banks be? Although commercial bank deposits will not disappear any time soon, the banking sector is likely to experience turbulent times in the years ahead. The report predicts that banks will see their funding become less stable and more expensive, their client relationships decline, and their access to transaction data decrease. The effects will be magnified for smaller banks with less capital, as funding from e-money providers becomes concentrated in a few large financial institutions.

Evolve or die: Banks need to focus their efforts on becoming more competitive, the IMF says. This means higher interest rates, better services, and new, more reliable sources of funding. Banks that are able to keep with the times — by integrating social media, providing quality online services, and user-focused design — will clearly have a leg up on the competition. Existing payment techniques such as Venmo, Zelle, or Apple Pay Cash, which facilitate payments by debit card, are good examples of how banks can reposition themselves as the digital revolution shakes the financial sector.

The secret life of birds: This arresting image of a bald eagle and a fox struggling over prey by photographer Kevin Ebi is one of several winners of the 2019 Audubon photography awards, which saw entries from 2,253 people throughout the US and Canada. Held by the National Audubon Society, an NGO that works to protect birds and their habitats throughout the Americas, the competition looks for originality, technical skill and a ‘creative approach’ to bird photography.

It’s another blessedly slow morning for Egypt in the foreign press, with the only story earning significant attention being the passing of the newly amended NGOs Act. Amnesty International says the law “includes only a handful of token cosmetic changes to address human rights concerns,” in an analysis of proposed amendments to the law, which was originally issued in 2017.

President Abdel Fattah El Sisi’s attendance yesterday of a technical military academy graduation ceremony to honor deceased scout Ahmed Abdel Azim, tops the front page of state-owned Al Akhbar this morning.

China’s economic slowdown has less to do with US policy than you may expect, the Financial Times’ global China editor James Kynge says (watch, runtime: 1:50). US President Donald Trump’s trade tariffs may have hit the Asian country’s net exports figures, and yes, exports to the US fell 7.8%. The numbers are “stark,” but net exports actually account for less than 1% of China’s GDP.

It’s about internal factors, dummy: The quarterly economic growth slowdown to 6.2%, which data released earlier this week showed, was mostly caused by domestic factors. Weakening investment in infrastructure, a fall in constructing new houses, and slower than usual industrial growth have all had a much more far-reaching impact.

El Sisi speaks to new Greek PM: President Abdel Fattah El-Sisi made a congratulatory phone call on Monday to Greece’s new prime minister, Kyriakos Mitsotakis, according to an Ittihadiya statement. El Sisi invited Mitsotakis to visit Cairo for trade and economic talks.

Foreign Minister Sameh Shoukry discussed the situation in Sudan with Finnish Foreign Minister and the EU’s special representative for Sudan Pekka Haavisto during a meeting in Cairo yesterday, according to a ministry statement. Shoukry and Haavisto shared their respective outlooks on our southern neighbor, and discussed Egypt’s efforts to maintain stability.

The Netherlands will provide Egypt EUR 120 mn in grants over the next four years, Laurens Westhoff, the Netherlands’ ambassador in Egypt said, according to Al Mal. The proceeds will be directed toward the agriculture and energy sectors, in addition to improving water services and promoting women’s employment.

Egypt has achieved an average natural gas surplus of 1.56 bn cf/d, an Oil Ministry source told the local press.Production at the Zohr natural gas field is expected to rise to 2.95 bcf/d by next July, up from 2.3 bcf/d currently. The country’s average gas consumption is expected to reach 6.39 bcf/d through FY2019-2020 out of a total production capacity of 7.95 bcf/d. Surplus gas is being exported through liquefaction plants in Idku and Damietta.

SODIC has signed a cooperation agreement with the Industrial Modernization Center (IMC) to build a 330 kWh photovoltaic (PV) power plant in Sheikh Zayed in collaboration with the United Nations Development Program (UNDP), IMC CEO Amr Taha Ahram Gate. The project, which is aimed to generate 520 mWh per year, is expected to cut carbon emissions by 300 tonnes annually.

The Egypt-Sudan 300 MW electricity grid interconnection project is expected to go live at the end of the year, Electricity Ministry spokesperson Ayman Hamza said, according to Mubasher. Egypt has completed “all necessary preparations” for a set-up estimated to have cost USD 56 mn. The political upheaval in Sudan has delayed the trial launch for the project, which were set to begin in April.

The Egyptian Electricity Transmission Company (EETC) will hold a meeting with the Benban Solar Energy Developer Association to settle the EGP 1.9 bn rise in the cost-sharing bill for projects in the Benban solar park, EETC sources tell the local press. According to the sources, the companies working on the solar projects are refusing to pay the sum, which is a result of increased building material costs, but the banks financing these projects are on board to extend additional financing to cover the cost increases.

The government is planning to launch a tender to select a private sector company to manage the Karnak and Philae temples, and the Valley of the Kings, Antiquities Minister Khaled El Anany said without specifying a timeframe. The ministry is also looking to contract private companies to run the Grand Egyptian Museum and the area of the Giza Pyramids.

Egyptian fintech startup Paynas is in final talks with five venture capital funds over financing agreements it expects to secure by 3Q2019, CEO Mohamed Mounir told Al Mal. The company will use the financing to fund expansion plans, which include developing its technology infrastructure to expand its client base across the country, Mounir said. The company, which provides a cloud-based platform used to manage banking, HR, and employee benefits, was awarded USD 50k last month as the winning prize at Seamless North Africa 2019.

CI Capital’s board of directors have approved setting up a consumer finance company offering installment plans for durable goods, according to an EGX disclosure (pdf).

Spanish laundry app company Mr Jeff has sold 10 franchises in Egypt since it began operations here several weeks ago, the company announced in a press release (pdf). The company is proposing to forego royalties and marketing fees for Egyptian franchisees during their first year of activity in an effort to boost take-up.

Shahid Law Firm’s startup-focused department, Venture, has signed an agreement with Gemini Enterprises Africa that will see Gemini offer entrepreneurs access to business mentorship, according to an emailed statement (pdf). Venture, which Shahid launched earlier this year, offers legal services to startups through an online platform.

The General Administration of Public Money Investigations has resolved fifty-five cases of financial fraud worth a combined EGP 200 mn and 3 mn in foreign currency (mainly USD and EUR), Egypt Today reports. The crimes ranged from bribery and administrative corruption to illegal currency trade, money laundering and tax evasion.

There’s no need to tell us that Egyptian ta’ameya outshines Syrian or Lebanese falafel, so we won’t argue with this BBC article stating outright that our version of this ubiquitous snack is the best in the world. What makes our ta’ameya mix so good? Both the use of broad beans (fuul), described as “softer and creamier” than chickpeas, and the addition of more herbs and vegetables, such as parsley, coriander and leeks, offering greater depth of flavor.

A museum to commemorate Egyptian novelist Naguib Mahfouz was inaugurated this week, after being postponed for years due to a number of issues, Reuters reports. The Naguib Mahfouz Museum and Creativity Center is in a redeveloped two-story building in Gamaliya that dates back to 1774, and houses the author’s belongings, including handwritten texts, and his personal library. The museum also has all Mahfouz’s works, in both old and new editions, seminar rooms, an audiovisual library, and a library containing research on him. His 1988 Nobel Prize remains with his family.