British Airways and Lufthansa suspend Cairo flights

We hate to open on a down note, but today’s news cycle will likely be dominated by British Airways and Lufthansa’s suspension of flights to Cairo due to what they described as “security concerns.” British Airways, whose lead was followed by the German airline, has so far remained tight-lipped on the nature of these concerns. We have chapter and verse in this morning’s Speed Round, below.

Tuesday will be off in observance of Revolution Day, blessing us with a mid-week break. The EGX and banks will be off, CBE sources tell MENA.

We also finally know when Eid Al-Adha will be: The waqfa falls on Saturday, 10 August and the first day of Eid will be Sunday, 11 August, sources from the National Astronomy Institute tell Masrawy. The vacation should run through Tuesday, but we’re expecting a fair number of people to bridge for a nine-day holiday.

The new administrative capital is finally getting a better name: The New Administrative Capital Company for Urban Development (NACCUD) has launched a competition for naming and designing a logo for the new capital. A cash prize of EGP 75k will be handed out to the winner, while the runner-up and third place will receive EGP 50k and EGP 25k respectively. The competition closes on 17 August, meaning that we may not be far away from finally naming the new capital. Check out the terms and conditions here.

Speaking of the new capital, that’s where the next youth conference on 30-31 July, Al Masry Al Youm reports. The last youth conference was held in July 2018.

In case you’ve been under a rock all weekend, Algeria took home the Afcon title on Friday evening after defeating Senegal 1-0 in a tense game at the Cairo International Stadium, Reuters reports. This is the second time Algeria have won the competition. You can watch the highlights here (watch, runtime: 3:05).

CAF crisis escalates: Under-fire Confederation of African Football (CAF) President Ahmad Ahmad has dismissed his deputy Amaju Pinnick as FIFA released its plans for reforming the trouble organization, Reuters reports. Ahmad, who is currently under investigation by the global body’s ethics committee for corruption, removed Pinnick because he was challenging him on multiple issues, sources said.

Shock South Korea rate cut caps week of emerging market easing: The South Korean central bank set the trend for other emerging market banks last Thursday after it made a surprise 0.25% cut to its benchmark interest rate, Reuters says. The Bank of Korea signaled that it may make further cuts if economic conditions do not improve. South Korea’s trade-dependent economy is currently being hit by a trade dispute with Japan and the continued uncertainty surrounding the US-China trade war. Indonesia, South Africa and Ukraine all made 25-50 bps cuts when their respective governing boards met last Thursday.

Another day, another provocation in the Arabian Gulf: Iranian forces have detained a UK-flagged tanker as it was passing through the Strait of Hormuz, Bloomberg reports. The seizure of the ship comes in response to the capture of an Iranian ship by British forces in the Mediterranean a few weeks ago. The UK foreign office has demanded that Iran release the ship immediately, threatening “serious consequences” if it does not comply.

Make it a double: The US claimed that it shot down an unmanned Iranian drone in the Gulf on Thursday, the New York Times reports. Iran denied the accusation, and released footage that it says proves that the US did not destroy the drone, the BBC says. All of this came just a few hours after Iranian Foreign Minister Mohamed Javad Zarif offered to permanently allow inspections of its nuclear facilities in return for a lifting of US sanctions, the Guardian reports.

Could the conflict trigger a global recession? It’s a no-brainer that all this tension can’t be good for commodity prices, but Bloomberg says a prolonged conflict “could help tip the U.S. and global economies into recession and even accelerate the worldwide move away from fossil fuels.” Oil prices could also jump to USD 100 a barrel in the immediate wake of a full-out war, but “some resilience of exports from the region” would help adjust prices to USD 80 per barrel, says Ken Medlock, a senior director at Rice University’s Center for Energy Studies in Houston.

The airwaves didn’t offer us any significant business-related stories last night, but the talking heads had plenty to keep them busy throughout the evening.

Are Schengen countries getting stricter about which country issues our visas? Not really: Everyone is required to get their Schengen visa from the country they plan to enter first, Foreign Ministry spokesperson Ahmed Hafez explained to a panicked Amr Adib. The host apparently received phone calls from several Egyptians who were denied entry into some European countries for trying to enter with a visa for a different country (watch, runtime: 07:36). The ministry had also issued a statement earlier yesterday reiterating these rules (which, as far as we know, have always been in place).

We can’t believe this is even a debate in 2019: El Hekaya and Masaa DMC both had the story of a 15-year-old girl who is currently behind bars pending an investigation into her stabbing of a man she said was trying to [redacted] assault her (watch, runtime: 15:27 and runtime: 01:51).

We know we lost the Afcon tournament … but let’s appreciate the good organization: Hona Al Asema focused on the success of Tazkarty, an online platform that fans used to buy their tickets, while Al Hayah Al Youm’s Lobna Assal praised the organization of the championship in such little time, paying special attention to how safe the matches were (watch, runtime: 38:22 and runtime: 34:58).

It’s been 20 days since the universal healthcare system was launched in Port Said, and Hona Al Asema aired a report on how that’s turning out so far (watch, runtime: 12:37).

British Airways, Lufthansa abruptly suspend flights to Cairo, citing “security concerns”: British Airways decided yesterday to suspend for seven days its flights to Cairo “as a precaution to allow for further assessment” of security arrangements, the airline said in a statement, according to Reuters. Three sources from Egypt’s airport security told the newswire that “British staff had been checking security at Cairo airport on Wednesday and Thursday,” but did not provide further details. Lufthansa followed suit with a one-day suspension of its flights to Cairo from Munich and Frankfurt yesterday, saying it would resume flights again today, according to the newswire.

British gov’t didn’t order the suspension, but did raise threat level in Egypt travel advisory: Egypt’s Civil Aviation Ministry said in a statement yesterday that the British airliner’s decision to suspend flights was not ordered from the British foreign or transport ministries. However, the Foreign & Commonwealth Office updated its travel advice on Egypt to say that there is “a heightened risk of terrorism against aviation.” The Civil Aviation Ministry also said it would arrange additional flights from Cairo to Heathrow airport in London to accommodate travelers’ plans.

Lest you need a reminder, the UK’s ban on flights to Sharm El Sheikh is still in place since it was imposed in 2015 following the Russian Metrojet crash. Last we heard on the matter, British Prime Minister Theresa May said in February that the ban was still “under review.”

The story is picking up steam in the foreign press, with the Financial Times, Bloomberg, the Associated Press, Huffington Post, Sky News, BBC, and of course British tabloids including the Daily Star and Metro all taking note.

Maybe not related, but probably also not helping matters: Public Health England issued a statement last week warning travelers heading to Hurghada about E. coli infections, which has reportedly affected “a number of people, including children” who traveled to the Red Sea town.

Gov’t unveils new EGP 6 bn per year export subsidy framework: The government unveiled the details of the long-awaited new framework for disbursing export subsidies. The new framework would disburse EGP 6 bn per year in export subsidies through the Export Subsidies Fund starting from FY2019-20, according to a statement by the fund released on Thursday (pdf). Some EGP 2.4 bn (or 40%) of the EGP 6 bn will be disbursed as a cash payment to exporters, the Export Subsidy Fund’s board said upon ratifying the framework. 30% of the annual disbursement, or EGP 1.8 bn, will be doled out through tax breaks and cuts to payments owed to the Finance Ministry. The remaining EGP 1.8 bn will be spent by the fund to “build up Egypt’s export capacities.” This would mean funding to developing facilities as well as promoting Egypt’s exports abroad, the statement goes on to explain.

You get bonus points if you raise exports, export to Africa, or are an SME: Corporations and medium-sized companies that raise their exports by 20-30% y-o-y will see their export subsidies raised by 15-30%. Small enterprises that have managed to increase their exports 20-30% can expect a 20-30% increase their annual allocation of export subsidies. The fund will continue to set aside an additional EGP 40 mn in subsidies to those exporting to Africa, the statement says.

Conditions: To benefit from these incentives, exporters need to source 40% of their production inputs domestically, the ministry said.

The program has the endorsement of a number of Egypt’s business associations, including the Federation of Egyptian Industries, the statement assured.

Mechanism for payment of overdue subsidies yet to be clarified: While the statements give us clarity on how the fund will run moving forward, it provides very little detail on the mechanisms for how outdated and overdue export subsidies are to be paid. Here’s what we know: The government is currently making the determination on how much export subsidies are due on a sector-by-sector basis, said Trade and Industry Minister Amr Nassar. The Finance Ministry is planning to publish a detailed accounting of what is owed by the government before settling up with the Export Subsidies Fund, Minister Mohamed Maait said. The statement also implied that the fund will set up an electronic platform to facilitate the red tape in applying for overdue export subsidies. We had noted reports on Thursday that the Madbouly Cabinet had approved a mechanism for repayment, whereby exporters could receive discounts on their obligations to the electricity, oil, and investment ministries and claim redeemable IOUs from the Finance Ministry.

IPO WATCH- Misr Italia to complete procedures to list 25% on EGX in six months: Property developer Misr Italia is once again considering an initial public offering of up to 25% of its shares on the EGX, and is expecting to finalize all necessary procedures within six months, Chairman Hany El Assal told Al Mal on Wednesday. The company will soon begin the selection process for which investment bank will lead the offering. Misr Italia originally said that it would list 20-25% of its shares in April 2017, but the offering has been delayed for more than two years for unknown reasons.

Misr Italia expects to raise EGP 2 bn from the IPO: The company will use the proceeds to finance ongoing projects, including the EGP 20 bn Il Busco and EGP 10 bn Vinci compounds in the new capital. The company is also developing two “Kai” resorts in the North Coast and Ain Sokhna.

The company has been reluctant to finance its work through bank loans due to high interest rates, but has started probing this possibility to fund the commercial and service portion of its development in the new capital, El Assal told the newspaper yesterday. We noted earlier this year that the developer was in talks with unnamed local banks to arrange a EGP 1.5 bn loan, EGP 550 mn of which will be earmarked for the company’s Cairo Business Park in New Cairo.

In a world where investors are bucking African stocks for African debt, Egypt shines at both: With Egypt’s GDP growing at 5.6% in FY2018-19, the country is bucking the “anemic” economic growth witnessed by African peers, giving it a clear advantage as far as equity traders are concerned. South Africa’s output contracted the most in a decade in 1Q2019, and its key index dropped 1.4% since April, Bloomberg says, while Nigeria is struggling to recover since the collapse of oil prices five years ago. Excluding South Africa, African stocks trade at a forward price-to-earnings ratio of barely 9 based on estimates for the next 12 months, far below the emerging and frontier market average ratio of 12. By contrast, the EGX30 has risen 4.6% YtD.

Egypt remains the star in a burgeoning African debt market: Even when looking at an African bull debt market, Egypt remains the most attractive carry trade there is. “EGP bonds, which yield 16%, have made total returns of almost 8% over that period, extending their gain this year to 25%,” Bloomberg notes. Foreign holdings in Egyptian treasuries stood at USD 19.2 bn mid-June, Vice Finance Minister Ahmed Kouchouk said at a presser on Wednesday. South Africa’s debt is up 6.9% since the end of April and Nigeria’s 4.7%, the news information service says.

INVESTMENT WATCH- ‘Mystery’ UAE fund to invest up to USD 90 mn in Suez Canal logistics project: An as of yet unnamed UAE-based fund is planning to invest USD 70-90 mn on a logistics project in the Suez Canal, said Walid Hegazy, founding partner at Hegazy and Partners, which were hired to advise on the transaction. He told the local press on Thursday the investors have conducted the feasibility study on the project and are awaiting regulatory approvals. The project will look to service ships docking along the Suez Canal’s ports, he noted.

EU to provide Egypt with EUR 20 mn in funding to wean itself off Russian gas: The EU is planning to provide Egypt with EUR 20 mn in funding for its natural gas sector, according to statements by the EU delegation’s head in Egypt Ivan Surkos picked up by Al Mal. The funding would be weaved into a series of loans from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and a number of other financial institutions to the gas sector, Surkos said at the signing of a fuel bunkering agreement between the Oil Ministry and the port of Antwerp on Tuesday. “The new project, called EU for Energy, is a five-year project for capacity building, passing experience, and strengthening the expertise of Egypt in the gas sector,” Surkos told the local press.

The motive — EU sees East Mediterranean gas (and our prime position in it) as an alternative to Russian gas: Surkos revealed that the grand vision for the aid is to help the EU wean itself off of Russian gas, with the East Mediterranean gas reserves and Egypt’s position in it as an export hub being the most viable alternative. Establishing the East Mediterranean Gas Forum (EMGF) — founded in Cairo back in January to bringing together the gas markets of Egypt, Cyprus, Israel, Greece, and Italy — is crucial for the EU to lower its dependence on Russian gas, and the East Mediterranean gas will be a convenient alternative source of energy for Europe, Surkos said. “We will announce a certain financial support for the EMGF next week as a symbolic amount of funding to support the regional cooperation in gas and energy,” he added.

Protecting its investment — EU is planning measures to counter Turkey’s interloping: It looks like the EU will push through with measures designed to dissuade Turkey from drilling illegally off the coast of Cyprus. “It has been announced that the EU is going to suspend negotiations with Turkey about Comprehensive Air Transport Agreement,” said Surkos. “The European commission will request the EIB to review all projects which the bank is implementing in Turkey, as part of other decisions, to make Turkey stop its drilling activities off the coast of Cyprus,” he noted.

New EU funding also coming for electricity: The EU will announce new funds to strengthen Egypt’s electricity grid through connecting it with the renewable sources’ produced energy, Surkos is reported to have said.

ITFC to provide USD 50 mn in SME loans in 2020: The Islamic Trade Finance Corporation (ITFC) will channel a USD 50 mn facility through local banks to finance SMEs in January 2020, CEO Hani Sonbol told Masrawy, without revealing which banks the ITFC will be working with. This will be the first time the institution provides funding to Egyptian private sector businesses. Egypt signed two agreement with the ITFC last year to unlock a total of USD 3 bn in financing to purchase foodstuffs and petroleum products. State grain buyer GASC then secured a USD 1 bn tranche in January.

MOVES- Oil Minister Tarek El Molla has tapped Mohamed Radwan (LinkedIn) as co-head of the Egyptian General Petroleum Corporation (EGPC), according to Al Masry Al Youm. Radwan was formerly assistant general manager at Apache and EGPC JV Khalda Petroleum Company.

We’re no fans of colonialism, but there’s no denying the grandeur, beauty, and sense of history offered by Egypt’s oldest hotels, originally designed as “virtual palaces that catered to the whims and fancies of Victorian-era travelers.” Pictured here is the beautiful indoor swimming pool of the Old Cataract in Aswan, one of Egypt’s most opulent establishments. This CNN feature gives a rundown of this and eight other hotels that still carry the traces of Egypt’s singular past.

The foreign press is squarely focused on British Airways and Lufthansa’s suspension of flights to Cairo. We have the full story in this morning’s Speed Round, above.

Other headlines worth noting in brief include:

• Pharaoh Tutankhamun’s coffin is set to be renovated for the first time its discovery in the 1920s, CNN notes.
• The Trump administration’s Mideast ‘Peace to Prosperity’ economic plan has been “foiled” by Egypt, Jordan and Saudi Arabia, said Palestinian Information Minister Nabil Abu Rudeineh last week, according to Asharq Al Awsat.
• Egyptian authorities intend to question eight men deported from Kuwait last week, believed to be members of the Ikhwan, who are reportedly set to stand trial in Egypt for the second time, the National reports.
• Egypt failed to capitalize on the financial and “soft power” opportunities afforded by Afcon, argue Ruth Michaelson and Nick Ames in the Guardian.

Egypt, Jordan to set up logistics center in Mafraq: The Egyptian and Jordanian chambers of commerce will establish a logistics center in Jordan’s Mafraq Governorate bordering Iraq and Syria, Federation of Egyptian Chambers of Commerce head Ahmed El Wakeel said. The center will comprise storage facilities and a zone for customs clearance and will be run by a holding company in which the federations will partner directly with industry players and an international company specializing in managing logistics centers. This public-private shareholding structure will allow for revenue sharing. The move comes as part of an Egypt-Jordan-Iraq plan to cooperate on manufacturing, energy, infrastructure, and the post-war reconstruction of Iraq and Syria.

Rome conference to showcase Egyptian investment landscape: Rome will host an investment conference on Egypt soon to introduce Italian companies to prospects in the country, Al Masry Al Youm reported. The announcement came following a meeting between Internal Trade Development Authority head Ibrahim Ashmawy and a delegation from the Italian Confederation for Economic Development, headed by its president, Jose Romano.

President Abdel Fattah El Sisi met with Algeria’s interim President Abdul Qadir bin Saleh in Cairo on Thursday to talk trade and economic ties, according to an Ittihadiya statement.

The New Urban Communities Authority (NUCA) has signed an MoU with Saudi-based Fas Energy to set up a waste-to-energy facility in 10th of Ramadan City, according to a Housing Ministry statement. No details were provided on the cost or capacity of the facility. NUCA will allocate a land plot to the Saudi company under a 25-year usufruct or leasing framework. We noted last October that the Fas has plans to invest USD 420 mn in solar and waste projects in Egypt, USD 325 mn of which were said to be earmarked for “waste recycling projects.”

Schneider Electric and General Electric were awarded contracts to build four power transmission control centers under a tender issued by the Egyptian Electricity Holding Company (EEHC), sources told the local press. Schneider Electric will build three power transmission control centers in Cairo, while General Electric will build one in Alexandria, the sources said without disclosing details on the value of the contracts. The EEHC had issued a limited tender for three international companies to build five power transmission control centers across Cairo, Alexandria and the Suez at the end of last year.

Centamin’s Sukari gold mine produced 117,913 ounces of gold in 2Q2019, bringing production in 1H2019 up to 234,096 ounces, the company said in its quarterly report (pdf) on Thursday. Centamin projects that it will hit its 2019 production target of 490,000 – 520,000 ounces at a cash cost of USD 675-725 per ounce.

Egypt’s sugar imports declined by 10.2% y-o-y in 1H2019 to 116.4k tonnes, compared to 129.5k tonnes during the same period last year, the General Organization For Export & Import Control (GOEIC) said. Meanwhile, frozen meat imports grew 11.5% y-o-y in 1H2019 to 116k tonnes from 104k tonnes last year, GOEIC said.

Egypt’s first artificial intelligence (AI) college has opened at Kafr El Sheikh University and is accepting the first class of students this school year, Egypt Today reports. Admission will only be granted to students with strong academic performance in math.

The Supply Ministry has signed an agreement with the Federation of Egyptian Banks and credit ratings agency iScore that will open up the records of the Commercial Registry to banks through iScore, Supply Minister Ali El Moselhy said on Thursday, according to a ministry statement. The move was designed to strengthen customer measures by banks, Moselhy said. In other iScore news, three local and international companies have offered to set up a special system to digitally evaluate nano lending via phones, iScore boss Mohamed Kafafi told Al Mal.

The Madbouly Cabinet’s dispute resolution committee began last week looking into the six-year dispute over the unwinding of the privatization of the Middle East Paper Company (Simo), Al Mal reports. Investors, the largest of whom is Al Ahly Financial Investment Management, are looking for EGP 500 mn in damages from a decision to reverse the privatization of Simo in 2013. The committee’s role in resolving such cases comes after the House of Representatives approved a law last month bringing these cases under its purview.

EFG Hermes is planning to set up a real estate private equity fund next year with a number of unnamed real estate developers, EFG Hermes Group CEO Karim Awad said, according to the local press. The fund is part of the firm’s expansion plans over the coming few years, which will also see EFG begin to offer insurance services set up one or two non-banking financial services.

Ernst & Young has won a tender to act as financial advisor to the Agricultural Bank of Egypt (ABE) in the bank’s development of its technology infrastructure, ABE Chairman El Sayed El Qasir told Masrawy. The bank is still in the market for a company to carry out the upgrade, and is currently working on the booklet of conditions for that tender, El Qasir said.

Including newborns into the commodity subsidies system could see the government spending EGP 91 bn in FY2019-2020, a government source told Al Mal. The FY2019-2020 state budget had allocated EGP 89 bn for commodity subsidies. Supply Minister Ali El Moselhy had delayed registering newborns to September from June, likely as the ministry has yet to complete purging the commodity subsidy system from Kramers (fraudulent beneficiaries of the subsidy system).

Misr Insurance Holding Company (MIHC) is in talks with two state-run banks to cooperate with them to provide insurance coverage for exporters targeting African markets, Chairman and Managing Director Basel El Hini told Amwal Al Ghad. The move comes as a number of countries require insurance and many countries are also not granting Egyptian exporters letters of credit easily, El Hini said.

At least 20 Daesh terrorists were killed over the weekend as the government launched retaliatory airstrikes in North Sinai province following a suicide bombing on Thursday, AP reports. Daesh claimed responsibility for the death of two people in the bombing in North Sinai, security and medical sources told Reuters on Thursday. This happened one day after four people were reportedly beheaded.

Premier League football club Aston Villa seems to have edged out a number of European clubs in a bidding war to buy Egyptian winger Mahmoud Trezeguet in a GBP 8.75 mn agreement with Turkish sporting club Kasimpasa, where he plays now, KingFut reports. Trezeguet has been with the Turkish team for two seasons.

Marsa Alam will soon become a no-plastic zone as Red Sea Governor Ahmed Abdullah is extending his policy of banning single-use plastics across the governorate, Abdullah recently said, according to Egyptian Streets. A ban on plastic came into force in Hurghada last month. The city’s officials have since been seeking to provide alternatives to help enforce the ban. The ban currently applies to 90% of Hurghada, and is expected to cover the entire city by the end of July, Abdullah said.

University students will have to complete a course to educate them on marital life as a prerequisite to graduation starting the coming academic year, reports Ahram Online. The course will provide tips on choosing partners and handling conflict. Its introduction is meant to curb Egypt’s rising divorce rate.

The remains of an enormous residential settlement, including a well-preserved multicolored mosaic floor, were recently uncovered at Alexandria’s Kom El-Dikka archaeological site by an Egyptian-Polish archaeological mission, Egypt Today reports. The settlement reportedly dates back to between the 4th and 7th centuries AD, and also contains a small theater, a grand royal bath and a group of 22 lecture halls from an ancient university.