Universal healthcare tithe remains a mystery as FinMin drafts changes

A delegation led by Investment Minister Sahar Nasr is in Washington, DC, today to attend the annual meetings of the IMF and World Bank, according to Mubasher. The gathering kicked off yesterday and wraps up on Sunday, and you can hit up the meeting website here.

The IMF’s World Economic Outlook report is set to be released today. That’s when the fund gives its view on the growth outlook for the global economy, emerging markets, MENA, and Egypt. As is customary, two chapters are already out. You can read them here and here (pdf). Expect a lower global growth forecast.

The two-day ‘Egypt Can’ conference starts today. The event will be attended by 65 top foreign investors in Egypt as well as representatives from international financial institutions, the domestic business community and the Egyptian government.

The Mediterranean Offshore Conference kicks off later today at the Bibliotheca Alexandrina. Leaders of international oil and gas companies with operations in Egypt — including Eni, BP, and Royal Dutch Shell — will be the keynote speakers at the three-day energy-focused gathering.

The House of Representatives is set to discuss the draft SMEs Act next week, SME Development Authority head Nevine Gamea tells Al Mal. The act has been in the pipeline since 2018 and is a centerpiece of the Sisi administration’s bid to push the informal economy to go legit. The bill is expected to provide tax and non-tax incentives for businesses to join the formal economy.

Key dates for your diaries this month:

• Our friends at AmCham will be hosting Social Solidarity Minister Ghada Wali for their monthly luncheon next Sunday, 20 October. Members can register here.
• Atoms for Peace, a gathering designed to promote nuclear cooperation between Egypt and Germany, kicked off yesterday and wraps up today. The two-day event is organized by the Egyptian Atomic Energy Authority (EAEA) in cooperation with Germany’s Alexander von Humboldt Foundation.
• The Intelligent Cities Exhibition & Conference will take place at the Hilton Heliopolis on 23-24 October.
• A B2B conference for German and Egyptian companies to talk cooperation will take place on Monday, 28 October in Cairo. Click or tap here to register.
• The US Federal Reserve will meet on 29-30 October to review key interest rates.

Wait, you mean business and political leaders in emerging markets sometimes expect gifts and hire each others’ kids? Such is the claim this morning atop a New York Times investigation that suggests Deutsche Bank (“for years a post child for misconduct in the finance industry”) gave gifts, hired children and paid politically connected consultants in its bid to become the top running of IPOs in the world’s second-largest economy. In other words: Monday in EM. Still: A must-read for finance nerds this morning.

Sign of the times: Goldbugs are back. Holdings of physically-backed gold exchange traded funds (ETFs) have surged to a record high “as a cocktail of concerns” over slowing global growth, the US-China trade war, and monetary policy uncertainty have increased the demand for the safe-haven metal, says the FT. World Gold Council Data shows a 15% increase so far into the year.

China’s exports took a nosedive in September on the back of its prolonged beef with the US and could slow down China’s GDP growth readings for 3Q2019, the Financial Times says. A 3.2% y-o-y drop in Beijing’s exports in September was mainly driven by exports to the US falling by 10.7%. The two sides had reached a preliminary agreement last week to end the tiff, but the final details will still be fleshed out over the next five weeks before the two heads of state meet at the Asia-Pacific Economic Cooperation leaders’ meeting in Chile.

The likelihood of the US entering a recession in the next 12 months has risen to 27%, according to Bloomberg’s tracker. This is higher than this time last year, but lower than it was prior to the last recession.

The company that bought Edison’s Egyptian oil and gas assets is on the march: Energean, which said back in July that it is buying Edison’s Egyptian oil and gas division as part of a wider transaction, intends to divest Edison E&P’s UK and Norwegian units to Neptune Energy in a transaction worth as much as USD 280 mn, Energean said yesterday (pdf). Energean aims to become the largest independent gas-focused E&P company in the Mediterranean and is accordingly divesting all of its non-core assets.

Poverty and development economists Duflo, Banerjee and Kremer take home the Nobel in economics: The 2019 Nobel Prize in economics was awarded jointly to Esther Duflo, Abhijit Banerjee and Michael Kremer for their work on fighting global poverty. The prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was awarded based on the three economists’ approach to solving the issue of poverty by breaking down the rather overwhelming problem into “smaller, more precise questions” that allow specific intervention policies to be designed. We have been rooting for Duflo — who is now the second woman to ever take home the prize — for several years now.

Also making international headlines:

• Tunisia has a new president: Conservative law professor Kais Saied has won the Tunisian presidential election, decisively beating media baron Nabil Karoui with 72.71% of the vote, the country’s electoral commission said yesterday. (Associated Press)
• The US has run out of patience with Turkey: The US has imposed sanctions on Turkish officials, raised steel tariffs to 50% and suspended trade negotiations with Turkey after it failed to halt its invasion of northern Syria, Vice President Mike Pence said yesterday. Worth remembering: The invasion came after The Donald gave Erdogan the go-ahead. (CNBC)
• As the battle to reduce plastic waste intensifies, could rent-a-Lego help? The world’s biggest toymaker thinks it just might, saying it was “totally open” to the idea of having their toys available for rent instead of just for sale. (Financial Times)

PSA for the iSheep out there: Apple’s new iPhone 11 and iPhone 11 Pro lines will roll out in Egypt on 26 October, according to the device maker’s Egypt website.

PSA for Android geeks: Google is expected to announce its Pixel 4 phone (aka: The Most Leaked Phone in History) at an event today in New York. It gets underway at 10am Eastern (4pm CLT).

It was a mixed bag of nuts on the airwaves last night.

Egypt is leading economic growth in the region: Al Hayah Al Youm’s Khaled highlighted an infographic on Egypt’s economic growth prepared by a government media department (watch, runtime: 02:45). The infographic also earned some airtime on Hona Al Asema with Reham Ibrahim (watch, runtime: 07:30).

Global protests erupted yesterday to condemn Turkey's aggression against Syria, Abu Bakr said (watch, runtime: 01:47). The EU has announced sanctions against Ankara (watch, runtime: 0:35), Ibrahim reported, pointing also to Foreign Minister Sameh Shoukri’s backing for the Syrian people (watch, runtime: 01:28).

El-Sisi urges anti-corruption watchdog to make its work public: President Abdel Fattah El Sisi followed up yesterday on progress on the Administrative Control Authority’s anti-corruption strategy, Masaa DMC’s Eman El Hosary reported (watch, runtime: 0:58). The president urged the authority to make its findings public.

A coalition of youth politicians and parties held their second meeting at the Tagamoa Party headquarters yesterday, focusing on topics that included democracy and women’s role in politics. El Hosary (watch, runtime: 01:43) and Hona Al Asema’s Reham Ibrahim (watch, runtime: 0:59) had the story.

What Mohamed Ghoneim would tell the president: Amr Adib had a lengthy segment in which urologist-turned-public intellectual Mohamed Ghoneim discussed what he would say to President Abdel Fattah El Sisi if he were to meet the president (watch, runtime: 9:32). Ghoneim rose to prominence after establishing a world-class urology and nephrology center in Mansoura and was a member of the constitutional committee. Ghoneim urged the government to consider revenues when taxing manufacturers and exporters. He also urged the government to pay attention to agriculture, among other things. Civil society is also important, Ghoneim told Adib, urging the government to work on reconciliation with NGOs and release wrongfully detained activists such as Hossam Mo'nes and Shadi Ghazali Harb (watch, runtime: 2:01).

Former professor Kais Saied has been elected as Tunisia’s new president, Abu Bakr noted (watch, runtime: 02:25).

LEGISLATION WATCH- Get ready for changes to the tithe that funds the Universal Healthcare Act. The Finance Ministry said yesterday that it has drafted changes to the funding system for the new universal health insurance system, but stopped short of making clear what those changes are, according to a report in the domestic press. The system is currently funded by a new 0.25% tithe on revenues imposed on all companies.

The ministry acknowledged that the changes are being made after pressure from industry associations, including the Federation of Egyptian Chambers of Commerce (which has the rather unfortunate acronym FEDCOC), the Cairo Chamber of Commerce and the Union of Egyptian Investors Associations.

What was business asking for? We had said back in March that lobby groups including the Federation of Egyptian Industries had proposed new mechanisms including that the 0.25% tithe on revenues (which is not tax deductible) be replaced with a 1% surtax on net profit.

The ministry’s proposal will now be reviewed by cabinet before it heads to the House of Representatives for debate. In a separate statement yesterday, the ministry said the new system is heavily endorsed by the nation’s political leadership.

Background: Two government sources had told us in September that the amendments would see the 0.25% tithe on revenues capped at EGP 10k per company. Loss-making companies will not be exempt from the payment. The ministry had previously suggested imposing the cap at EGP 100k, but brought the figure down to EGP 10k when the proposal met with backlash from the business community. The government began rolling out its EGP 600 bn health insurance plan in Port Said in July, and more governorates will be added gradually over the course of the next 11-13 years.

Treasury yields recover for second consecutive week: Yields on government treasuries continued to recover after falling by 200 basis points since the central bank resumed its interest rate easing cycle in August. A gauge used by Al Mal to measure average yields climbed by 0.26% to 15.75% after last week’s sales. This came as subscriptions for Egyptian t-bills and t-bonds fell substantially during an auction yesterday.

This shows the power of economic expectations: The ongoing recovery is in part because investors ahead of the September Monetary Policy Committee (MPC) meeting overestimated the extent of the rate cut, pricing in expectations of a 150-200 bps rate cut, rather than the 100 bps that was made, the newspaper quoted an analyst as saying. Falling yields reduced investor appetite and led to a sell-off, which in turn pushed up yields. The fact that this trend is holding suggests that there are market expectations of further easing in the two upcoming MPC meetings on 14 November and 26 December.

Al Nowais Investments is bidding to build USD 700 mn-worth of renewable energy plants in Egypt, sources from the Electricity Ministry said, according to Al Mal. A 500 MW wind power plant and a 50 MW solar plant could be built in undisclosed locations under a build-own-operate framework. The bid comes less than two weeks after the Electricity Ministry pulled the plug on Al Nowais’ USD 4 bn, 2.65 GW coal station in Oyoun Mousa. Sources said at the time that the Emirati company will discuss with the government an offer to set up renewable plants with a combined electricity generation capacity of 500 MW.

Finance industry regulator gives okay to regional green investment group: The Financial Regulatory Authority (FRA) approved yesterday a proposal to set up a regional organization to promote green investment in Africa and the Middle East, it said in a statement. The Regional Center for Sustainable Finance, it said, would channel global investment into environmentally-friendly projects in the new administrative capital and look to replicate the success of the Benban solar park.

The story is light on detail of who is backing the center, who will run it, whether it will invest capital of its own or serve only as an investment promotion agency, etc. The FRA positioned the creation of the body as part of the government’s bid to meet its 2030 UN Sustainable Development Goals and targets set out in its Vision 2030 strategy. Signoff on the agency will require cabinet approval.

STARTUP WATCH- Two Egyptian entrepreneurs are among the 10 finalists of the Africa Netpreneur Prize Initiative’s 2019 grand finale,which will be held in Ghana next month, Alizila reports. Waleed Abd El Rahman, the CEO of Mumm, and Omar Sakr, the founder and CEO of Nawah-Scientific, will join contestants from Nigeria, Liberia, Rwanda, and Cote d’Ivoire to make their final pitches at the event. The contestants are competing for a share of the USD 1 mn prize pool, which will be determined by four judges, one of whom is Alibaba Group founder Jack Ma. The initiative is his flagship entrepreneurship program in Africa, led by the Jack Ma Foundation.

MOVES- Emirates NBD Egypt has appointed Mohamed Zakout as CEO for retail banking, Al Mal reported. Zakout has 27 years of experience in the banking sector.

CORRECTION- We reported yesterday that Azimut is looking to establish an Egypt-focused private equity fund. It is in fact setting up a fund to invest in Egyptian equities (the shares of publicly traded companies), rather than a PE fund (investing in privately held companies) as we said yesterday. We have corrected the story on our website.

World entering “synchronized stagnation,” say FT, Brookings: The global economy is heading into so-called “synchronized stagnation” as growth stalls in advanced economies and flatlines in emerging markets, according to an index created by US think tank the Brookings Institution and the Financial Times. The Tracking Index for the Global Economic Recovery (Tiger), comprised of a number of indicators that measure economic activity, investor confidence and financial markets, suggests that while a recession is still not certain, advanced and developing economies are simultaneously stagnating with no apparent light at the end of the tunnel. “Persistent trade tensions, political instability, geopolitical risks and concerns about the limited efficacy of monetary stimulus continue to erode business and consumer sentiment holding back investment and productivity growth,” economist and senior fellow at Brookings Eswar Prasad writes.

It’s not all bad: Employment figures are continuing to hold up, even in Germany where an industrial slump looks likely to push the economy into recession. And the 10% surge in oil prices that followed last month’s attack on Saudi Aramco proved to be short lived, with Brent and US prices quickly returning to their previous levels.

That said, the world is in need of a plan. Hoisting the global economy out of this rut requires that policymakers take action to coordinate new fiscal and monetary stimulus programs. But with ultra-low or negative interest rates fast becoming the new normal, the use of monetary policy will become “increasingly untenable,” Prasad suggests. “Unless governments make a broader commitment to structural reforms and the prudent use of fiscal policy, persistently low rates will remain a malignant feature of the world’s synchronized stagnation,” he writes.

Putting the size of our tourism industry into perspective: The map above from HowMuch.net uses World Tourism Organization data to create a visual representation of how much tourists spend in several countries, and adjusts each country’s physical size to correlate with the spending amounts. Egypt is #1 in Africa, and is second in the region to the UAE, with tourist expenditure coming in at nearly USD 12 bn. That amount, however, is dwarfed by other destinations, including the US (USD 214 bn), Spain (USD 74 bn), and France (USD 67 bn).

The government’s response to last month’s protests continues to receive attention in the foreign press. Amnesty International alleged that Human rights activist Esraa Abdel Fattah was mistreated by security officials after being arrested on Saturday. The statement was picked up by the Associated Press, while Agence France-Presse reported that Abdel Fattah and Bread and Freedom party official Abdallah Said were detained at the weekend.

The New York Post goes against the countervailing narrative in the Western media. Sohrab Ahmari criticizes the New York Times’ “anti-Sisi” coverage, claiming that moderate Muslims and Christians would face greater threats under an Ikhwani government.

How do you quantify the impact of managers on an organization’s performance? A recent study using behavioral economics and psychology seeks to assess the degree to which preferential treatment designed to incentivize managers can affect workplace productivity, the Economist writes. It examines the role of hierarchy in team collaboration, using a public-goods game — a standard of experimental economics that assesses the individual propensity to contribute to a group, in a situation where a person could potentially benefit from freeriding on the contributions of others — and adding key variables. In one game, the group was divided into “managers” and “workers,” with the managers subject to different rules than the workers, and the rules themselves varying from round to round. The results were then compared to those from a game in which there was no hierarchy.

The takeaway: Giving more incentives at the top of the pyramid and more work at the bottom is dangerous. Ultimately, the study supported the idea that, while the mere presence of managers can boost team collaboration and individual contributions, providing special incentives to managers can have an overall dampening effect on performance. Workers are less inclined to be collaborative when they feel they undertake a disproportionate amount of work and receive fewer benefits than their managers. More worryingly, the study also found the managers benefitting from their incentives in “sneaky” ways when they had discretion over the amount they could receive from group contributions, shortchanging the workers.

The European Bank for Reconstruction and Development (EBRD) could invest USD 60 mn in Infinity Solar to develop new renewable energy projects, it said in a statement. The bank plans to invest in electricity distribution infrastructure and EV charging stations, in addition to either new solar plants or onshore wind facilities. “The project is in line with the efforts undertaken by the EBRD to scale up renewable energy penetration in Egypt's energy mix, and promote the liberalization of the electricity sector by supporting the private-to-private (merchant) renewable energy segment,” the bank said. The proposal passed its structure review and is now pending the final review.

Polaris International Industrial Parks has signed contracts with four investors to develop 50k sqm of land in Sadat City, Assistant Manager Bassel Shoeira told the local press. There was no mention of the value of the contracts, but he said that the company will hand over the land plots next month. Shoeira said earlier this month that Polaris had signed contracts with three multinational and local companies to invest in the first phase of a new industrial zone in Sadat City. It’s unclear if the two sets of agreements are related.

Flag carrier EgyptAir will begin operating two weekly flights to Hangzhou in eastern China on 29 November, company head Ashraf El Kholy said, according to Al Mal. The move is part of a plan to launch more lines lines between Egyptian and Asian cities, El Kholy added.

Ibrachy Legal Consultancy acted as legal advisor to Global Telecom Holding in its acquisition by majority shareholder Veon and subsequent delisting from the EGX, founding partner Ashraf El Ibrachy told Al Mal.

Saudi Arabian e-payments company HyperPay is planning to expand in the Egyptian market, Chairman Abdullah Altamami told Zawya, without providing any details about its investment plans. HyperPay currently has an office in Egypt, the UAE, and Jordan, and is active in Kuwait, Bahrain and Oman.

A Cairo court sentenced Libyan terrorist Abdel Rahim El Mismary to death for his involvement in the 2017 Western Desert attack that killed 16 policemen and injured 13 others, Al Masry Al Youm reports. The sentence will now be referred to the grand mufti, and a final verdict will be pronounced on 3 November.

The government owes contractors more than EGP 300 mn for road projects undertaken in 2019, an official source from the compensation committee of the Egyptian Contractors Union has said. This amounts to around 80% of the total cost of the projects. Payments have not been disbursed because the government does not have the money to pay, the source claimed.

Egypt secured its spot for showjumping at the 2020 Olympics next summer after a team of four riders won the Nations Cup in Morocco on Sunday, according to King Fut.

Facebook tops Egypt’s YouGov NextGen brand survey: Facebook has again topped this year’s YouGov NextGen’s Word-of-Mouth rankings for Egypt. The survey measures the frequency of discussions about several brands among adults aged 18-34 as an indicator of brand health. WhatsApp, Uber, and the National Bank of Egypt maintained their positions at second, third, and fourth.

Supermodel Adriana Lima recently visited Egypt and used the trip as a chance to get woke on Instagram. “Exploring the pyramids and connecting with the universe in a meditational phase in favor of global peace #worldpeace,” she wrote. Exactly what her visit does to promote global peace is unclear, but we appreciate the publicity.