Egypt wants another USD 500 mn from the World Bank to help tackle pollution

The IMF and World Bank annual meetings continue through the weekend in Washington, DC. Prime Minister Moustafa Madbouly, Investment Minister Sahar Nasr, and Oil Minister Tarek El Molla are in the US capital to attend the meetings. The Egyptian delegation had a busy day yesterday with several sit-downs with international institutions and politicians. We have the full rundown of everything you need to know on what’s happening across the pond in this morning’s Speed Round, below.

The meetings end on Saturday; you can visit their website here.

We’re also keeping our eyes open for a memorandum of understanding between Egypt and Euroclear, which the State Information Service said on Tuesday should be signed while officials are in Washington this week. Egypt’s debt instruments are expected to be clearable through the Belgium-based clearinghouse by the beginning of next year.

Dubai has imposed a limit on state involvement in the economy, imposing a moratorium on the creation of new state-linked organizations. New state-owned companies will only be established if necessary on national security or strategic grounds or if private sector companies are unable to deliver the goods or services needed. The move is designed to make sure state-related entities “arent’ crowding the private sector and holding back economic development,” Bloomberg reports.

The latest from Washington: Central bank stimulus is a double-edged sword, IMF says, as it sounds the alarm on corporate debt levels. Around 40% of corporate debt in advanced economies is at risk in the event of a global recession, the IMF warned in a report issued during the third day of its annual meeting yesterday. Central bank-run stimulus programs, while successful at mitigating the short-term risks generated by current trade tensions, are giving companies incentives to take on unsustainable levels of debt and investors to plough into risky asset markets.

And in statement seemingly timed to perfection, Moody’s claimed an “uncomfortably high” risk of global recession within the next 12-18 months. “I think risks are awfully high that if something doesn’t stick to script then we do have a recession,” Mark Zandi, chief economist of Moody’s Analytics, told CNBC. “I’ll say this also: Even if we don’t have a recession over the next 12-18 months, I think it’s pretty clear that we’re going to have a much weaker economy.”

Carney chipped in with a refreshingly non-apocalyptic statement: Central banks will not be left in the dust by Big Tech in the race to develop financial technology, Bank of England Governor Mark Carney said during an IMF panel discussion yesterday. Admitting that policymakers would struggle to match the private sector for innovation, he said that systemic central banks like the Federal Reserve are indispensable institutions for maintaining financial stability. (CNBC)

Aramco IPO edges closer: Saudi Aramco’s IPO will materialize “sooner than everyone thinks,” Aramco Chairman Yasir Al-Rumayyan said at the Saudi-Russian summit in Riyadh earlier this week, according to a statement (pdf). Aramco’s board of directors is expected to give its final approval to pushing ahead with the IPO plans this week, the statement says. Anonymous sources had told Bloomberg last month that the company could kick off its IPO process as early as 20 October and make its stock market debut on the Tadawul in November.

The Tadawul could do with an IPO right now. The Saudi stock exchange plunged into a bear market on Tuesday, after a 1.6% fall left the index down more than 20% down from its recent high in May. Yesterday offered some respite after shares rose 0.5%, lifting the market out of bear territory.

What is behind the downturn? Geopolitical uncertainty in the Gulf has spooked investors in recent months, particularly following the attack on Aramco’s oil facilities last month. Some analysts also suggest the US-China war has had an impact, while passive flows generated by the Tadawul’s inclusion into MSCI’s emerging market index have dwindled after a number of brokers warned that Saudi equities were overvalued. More recently though, analysts have suggested that investors have been offloading shares in order to make room for an Aramco buying spree, Bloomberg suggests.

KUDOS- Our friends at Hassan Allam won the infrastructure project of the year at the 2019 Construction Innovation Awards in Dubai on Tuesday for their Al-Mahsama irrigation drain water treatment plant in Sinai. The plant, awarded on an EPC basis, edged out entries from Saudi Aramco, Al Naboodah Construction Group, and KEO International Consultants. It uses treated wastewater from the Al-Temsah Lake to connect 50 hectares of remote, dry land in northern and central Sinai to irrigation with a capacity of 1 mn cubic meters of water a day.

Attention VAT taxpayers: All companies will be required to submit their VAT disclosures electronically starting January, Tax Authority boss Abdel Azim Hussein said, according to Youm7.

Key dates for your diaries this month as we head into the weekend:

• Our friends at AmCham will be hosting Social Solidarity Minister Ghada Wali for their monthly luncheon next Sunday, 20 October. Members can register here.
• The Intelligent Cities Exhibition & Conference will take place at the Hilton Heliopolis on 23-24 October.
• A B2B conference for German and Egyptian companies 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.

Mr. Madbouly goes to Washington: Prime Minister Mostafa Madbouly’s trip to Washington got headline treatment on the airwaves last night, with Masaa DMC and Al Hayah Al Youm both pointing out that the PM met with a number of high-profile US officials and heads of key global organizations on the sidelines of the annual IMF and World Bank meetings (watch, runtime: 01:51), (watch, runtime: 03:19) and (watch, runtime: 01:11). We have chapter and verse in this morning’s Speed Round, below.

The EGP is still killing it: The EGP changing hands at 16.28 against the greenback yesterday, up from about 18.00 exactly a year ago, Al Hayah Al Youm’s Khaled Abu Bakr said, predicting that inflation would continue to fall as a result (watch, runtime: 02:36). We can’t help but run a small Abu Bakr fact-check here though: He claimed that this was the first time the EGP had traded as high as 16.28 against the USD since 2016, when actually the currency rose to 15.84 in February 2017.

Yahduth Fi Misr went in hard on the GERD conspiracy theories: Political analyst told Sherif Amer that there are dark forces working to undermine Egypt in the negotiations over the Grand Ethiopian Renaissance Dam, (watch, runtime: 01:17). “It’s an attempt to strangle Egypt. Ethiopia is not alone in this; there’s a strong force behind it,” El Feky claimed.

The discovery of at least 20 ancient wooden coffins in Luxor, which we noted yesterday, was also among topics brought up on Masaa DMC’s Ramy Radwan’s show (watch, runtime: 02:45).

Finally, Mo Salah’s adorable celebration of his five-year-old daughter, Makkah, also earned some airtime with Abu Bakr (watch, runtime: 03:18).

New USD 500 mn World Bank facility to help Egypt cut pollution? Investment Minister Sahar Nasr met yesterday with World Bank officials in Washington to discuss a potential USD 500 mn facility to help Egypt reduce pollution, according to a ministry statement. Four ministers, including Nasr, had sat down with Regional Director Marina Wes last week to lay out their plans to make their projects more environmentally-friendly. World Bank Group Vice President for MENA Ferid Belhaj, Executive Director Merza Hassan, and Wes also discussed with Nasr other ways that they could work together to improve Egypt’s infrastructure.

We also want money to wean microbuses off diesel fuel: Oil Minister Tarek El Molla also asked World Bank boss David Malpass for financial support for the push to convert microbuses to run on natural gas, a cabinet statement said.

Ministers talk with the new OPIC: A cabinet statement said that Nasr, El Molla, PM Moustafa Madbouly and Trade Minister Amr Nassar met with officials from the US International Development Finance Corporation (DFC), but didn’t tell us anything about what was discussed. There was an intimation that it could get involved with Egypt’s electricity interconnection projects in Africa, but that was it. The DFC was set up last year to consolidate the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority.

Talks on Ethiopia, US prisoners in Egypt with Pence: Madbouly discussed the ongoing negotiations with Ethiopia over the Grand Ethiopian Renaissance Dam, as well as the fates of US citizens currently detained in Egypt, with US Vice President Mike Pence.

And in diplomatic miscellany: US Treasury Secretary Steven Mnuchin met Madbouly to talk social housing, while ministers met Secretary of Energy Rick Perry and Trade Secretary Wilbur Ross to talk energy investments and the new customs mechanism conversely.

REGULATION WATCH- CBE issues new regs to reduce bank lending risks: Restrictions placed on bank lending to corporate borrowers will now take into account loans made by non-bank affiliates (so-called NBFIs, or non-bank financial institutions). The measures are part of new CBE regulations (pdf) designed to diversify credit portfolios of commercial banks and reduce concentration risk.

What’s this restriction? Existing rules prevent commercial banks from lending more than 15% of their base capital to a single borrower— what’s called a “single obligor” limit in the trade. This limit rises to 20% when lending to more than one related party. These rules only apply to commercial banks, and place no new restrictions on the lending activities of their NBFI affiliates.

The new rules change this, bringing all lenders within the same regulatory framework. All NBFIs affiliated with a commercial bank will have to abide by the same requirements, prohibiting them from lending more than 15% of their capital base to a single client. Insurance companies will not be covered by the new regulations.

The new regs are part of a series of reforms to hedge against risk: CBE guidelines issued in March require commercial banks to set aside additional capital above the base requirement. The proposed Banking Act would also see banks face new minimum capital requirements, which would rise to EGP 5 bn, up from EGP 500 mn currently. Earlier changes addressed capital adequacy ratios and effective limits on personal borrowing.

INVESTMENT WATCH- Mastercard plans to invest EGP 2 bn in Egypt over the next five to six years, including EGP 500 mn next year, MENA Regional President Khalid Elgibali said at the Egypt Can conference yesterday, according to the local press. Elgibali did not provide further details on what the company will invest in. MasterCard has been looking to work with the CIT Ministry to develop advanced digital payments infrastructure in the new administrative capital. The company also floated plans to introduce e-payment services to the transport and agriculture sectors, and SMEs to expand e-banking, which it projected to double in size before 2022.

HHD could extend the deadline to accept bids for 10% stake + management: State-owned Heliopolis Housing and Development (HHD) could extend the deadline to accept bids to acquire a 10% stake (with management rights) after a number of companies were reported to have missed the Monday cut-off point, sources told Mubasher. The company will announce a decision on a new deadline as soon as possible, they said. It emerged on Tuesday that several local companies failed to submit bids while trying to form alliances with international companies, and want the deadline extended. Eight companies were initially reported to have been interested in the company, including our friends at SODIC, EFG Hermes, BPE, Emaar Misr, and Orascom Development Egypt (ODE).

Background: HHD was originally scheduled to compile a shortlist of companies by mid-November before going ahead with a final round in December. Public Enterprises Minister Hisham Tawfik said last month that the 10% stake on offer was part of a wider plan to offer for sale a 25% stake in the company.

STARTUP WATCH- Uh, is Swvl operating in Kenya without the right licenses? Mass transit app Swvl has reportedly defied orders from Kenya’s transport regulator to stop operations there on the grounds that it doesn’t have the right permits it needs to operate, Kenyan publication Business Daily reports. Kenya’s National Transport and Safety Authority (NTSA) reportedly issued the order on 1 October, but the ride-hailing app continued to operate routes within Nairobi.

The NTSA asked police on Tuesday to impound Swvl vehicles and charge both drivers and owners. It says the firm holds a tour service license, but requires a different Public Service Vehicle (PSV) permit to operate, NTSA Director-General Francis Meja told Business Daily. Meja said the NTSA will keep its order in place until Swvl gets the correct permits or receives an exemption, saying that the regulator is “open for discussions.” A competing service provider, Little Shuttle, was reportedly also ordered to suspend operations until it procured the appropriate permit and has complied.

What will happen to Swvl’s Nairobi expansion plans is far from clear. Swvl’s operations in Kenya began in March and marked its first foray into international markets. The company now has 150 buses operating on 100 city routes in Nairobi, and had reportedly planned to grow its network to 500 routes served by 1k buses. In response to an inquiry from Business Daily, the firm answered: “While we may not be able to share any specific details yet, we are happy with the progress we have made so far.”

REGULATION WATCH- Exec regs for Mineral Resources Act coming next month: The executive regulations for the Mineral Resources Act will be completed at the beginning of next month, an official source from the oil sector told Al Masry Al Youm on the sidelines of the Mediterranean Offshore Conference in Alexandria. The government has completed 80% of the regulations, which reportedly address specific complaints made by investors. Industry players have said the recent amendments to the Mineral Resources Act have made Egypt’s mining sector more attractive for investors.

Background: Ratified in August, the amendments expand the size of concession areas, grant a new authority the power to issue licenses for areas of unlimited size, and allow companies to renew their licenses for more than one term. Separate contracts will be used for exploration and excavation areas, and royalties will be capped at 20% of the value of annual production.

DISPUTE WATCH- OIH-Prism JV, Sound and Light Company reach settlement over contract annulment: A JV between Orascom Investment Holding (OIH) and Prism International has reached a settlement agreement with the Sound and Light Cinema Company (SLCC) over the annulment of a EGP 10 mn contract to develop the Giza Plateau, Public Enterprises Minister Hisham Tawfik tells Al Mal. OIH and Prism will make a settlement payment to the ministry, Tawfik said, without disclosing further details.

Background: SLCC had scrapped a EGP 10 mn contract to develop and manage the sound and light show at the Pyramids with OIH last year after the latter failed to meet its contractual obligations. OIH pointed the finger at its partner Prism Entertainment, and claimed that it had failed to carry out its end of the job. The two parties agreed in February to negotiate a settlement with SLCC. OIH said it was still interested, but SLCC insisted on relaunching the tender and raising the minimum value to USD 2.5 mn.

Nigeria-based e-commerce platform Jumia plans to launch a tech hub in Egypt to support its e-payments system Jumia Pay, Jumia Egypt CEO Hesham Safwat said, according to Egypt Today. The tech hub will train a team of developers and engineers to offer technical support so that online payments through Jumia Pay run smoothly.

Mubarak sits down for a rare interview on 1967, 1973 wars: Former President Hosni Mubarak made a rare appearance in an interview with a YouTube channel to reflect on the wars Egypt fought against Israel in 1967 and 1973 (watch, runtime: 25:46). The interview with a newly created channel named Mubarak Archives, includes footage from the war and then-president Anwar Sadat. Mubarak, now 91, recalled the preparations for the war, and the air battle of Mansoura — which is now celebrated on 14 October as Air Force Day.

It’s slim pickings in the foreign press this morning. Newsweek is running an opinion piece describing the recent arrest of activists as “institutional insanity.”

Heart disease may not be a modern phenomenon, Egyptian mummies show: Later-stage arterial plaque found in Egyptian mummies dating to over 3k years ago is among evidence that suggests the condition may have been more common in ancient times than previously thought, Live Science reports.

Nobel Prize winners sit down to explain their groundbreaking poverty intervention research: Poverty is not the intractable problem it’s often made out to be, and can be addressed using practical and inexpensive steps, backed up by clear scientific evidence, say the winners of the 2019 Nobel Prize in economics in an interview with the Economist (listen, runtime: 14:15). Their experimental approach is particularly effective because it allows them to pinpoint where a set of commonly-referenced theories intersect with realities experienced on the ground, using research obtained directly through work with governments and citizens in developing countries. They can apply different variables related to a particular challenge to gain a richer understanding of its causes.

No one “silver bullet” can eliminate all the issues that keep people poor: One especially effective piece of research disproved a common hypothesis that immunization rates in India are low because of accessibility issues. The experiment showed that a supply intervention (providing an absolutely consistent service) boosted the rate of immunization to 12% from a base rate of 5%. But offering additional incentives to families — including bags of lentils and sets of plates to those who completed the immunization program — boosted the rate to 37%, and actually halved the cost of immunization. They argue that poverty is not a single, constant problem, but often an accumulation of different issues that feed on one another, and to tackle it you don’t need a silver bullet, but “a set of silver pellets that will shoot down all these different enemies.”

Egypt will inaugurate the USD 2 bn, 1.4 GW Benban solar energy park in Aswan at the end of November, Electricity Minister Mohamed Shaker said, Al Mal reported. Twenty-nine plants have already been linked to the national grid and began commercial operations. Egypt aims to produce 20% of its energy needs from renewable sources by 2022 and 42% by 2035.

In related news: Scatec Solar has connected the last of its six 65 MW solar power plants in the Benban solar power park to the national grid, the company said in a statement. The company had connected the fifth plant early last month. Scatec Solar’s plants in Benban will generate an estimated annual 870 GW of electricity when fully operational.

The Egyptian General Petroleum Corporation will take out a USD 650 mn loan from the International Islamic Trade Finance Corporation to buy petroleum products, United Bank CEO Ashraf El Kady said. State-owned United Bank is contributing USD 40 mn towards the loan, he said.

The Chemical Industries Holding Company (CIHC) is looking into setting up a new USD 500 mn fertilizers plant in Suez through a joint venture with an unnamed private company, Deputy Chairman Walid El Rasheed told Youm7. No further details were provided. We had previously noted that CIHC had been considering two offers, including one from Tocaico International Company, to build two Suez fertilizer factories worth a combined USD 1.3 bn.

Prague’s Mut Automotive will collaborate with the Military Production Ministry on 19 industrial projects, CEO Michel Knight told the local press on the sidelines of the ‘Egypt Can’ conference, which concluded yesterday. The company will begin at the end of this month the first phase of a project to turn 90k public transport buses to natural gas or electricity. Under the agreement, the company will replace the motors of 6k buses per year, Knight said, adding that the company will probably convert them into electric buses due to difficulties in converting fuel motors to natural gas. Mut will announce its intention to manufacture the first loader in Egypt. The company also has plans to work with the ministry to turn white taxis to electric motors within five years by importing batteries from China’s Geely Global.

Hassan Allam Construction has begun civil construction and infrastructure work at the planned Al-Salam City-new capital-Tenth of Ramadan electric train line, alongside other contractors, Business Development Manager Medhat Tawfik said. The work is expected to be completed by June 2020. The company’s exact share size as well as its value has yet to be decided, Tawfik said. China earlier this week signed contracts worth USD 571 mn with seven Egyptian contractors to build the 70-km line, which is expected to be completed in two years and serve some 350k passengers per day.

Credit Agricole plans to expand the number of branches by 25% by the end of 2022, Managing Director Pierre Finas told CNBC Arabia. The bank’s loan portfolio had reached EGP 24 bn by the end of June, he added. Credit Agricole reported a 1H2019 net profit of EGP 1.3 bn, compared to EGP 1.1 bn a year earlier.

The United Bank signed a financing agreement with Madinet Nasr Housing and Development to fund its planned construction of EGP 200k-worth of social housing units, according to Masrawy. No details were provided on the amount United Bank will be lending.

Shalakany Law Firm acted as sole legal counsel to Emaar Misr in its longstanding dispute with state-owned El Nasr Housing, which culminated in an agreement that will see Emaar pay a USD 100 mn cash settlement, the firm said (pdf). Shalakany also represented Sharm Dreams Group in its agreements with Jaz Hotel Group that will see the latter manage the Sharm Dreams and Al Fayrouz resorts, according to a separate emailed statement.

Hedayat Islam, co-founder of Eklego and founder of Jam Space UK: My Morning Routine looks each week at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Hedayat Islam, who is the co-founder of Eklego — an award-winning Cairo-based architecture, interior, and furniture design firm, with a team of over 70 people — and the founder of Jam Space UK.

My name is Hedayat Islam and I’ve been an interior and product designer for the past twenty years. I studied interior design in New York before moving back to Egypt, where I co-founded Eklego Design with my partner and architect Dina El Khachab. I moved to London six years ago, where I founded and run Jam Space UK — an interior design company which is based in London, but has its roots firmly in Egypt.

I still work with Eklego on interior design projects and product design, while Dina works on separate projects and manages the company’s day-to-day operations. With Jam Space, I work on projects in London, and we’re also about to launch our wallpaper and fabric collection at Eklego and Shewekar’s showrooms in Zamalek. This is a pattern-intensive collection, which celebrates Egypt’s rich ornamental history, and it’s accompanied by a small selection of home accessories.

My schedule is a busy one, but I love what I do. On a daily basis, I balance work on my projects for Eklego, as well as my products and the day-to-day running of Jam Space. Along with this I have three daughters, who are of course my top focus and priority.

Mornings start early. I’m up at 6 am, preparing breakfast and lunch boxes for my kids, and getting them ready for the day before seeing them off by 7:30 am. Then I start writing my to-do lists, planning the day, and seeing how I can divide it up to be as efficient as possible. You can imagine the whirlwind that comes from working in two separate countries, so I need to plan well. I then unwind and clear my mind by exercising or going for a run. My actual workday then starts with conversations with the Cairo team, followed by the team I work with in London. Our focus varies from day to day, depending on our projects and priorities at the time, but it’s essentially a process of gradually ticking items off my to-do list.

My favorite new hobby is sculpting, and I’ve managed to carve out one day in the week to practice it. Between 4 and 5 pm I start winding the day down, depending on what time the kids come home.

I enjoy watching films and reading novels when I can make time for it. I loved the movie ‘Yesterday,’ which is a comedy by director Danny Boyle about a songwriter who wakes up one day to find that no one else on Earth remembers The Beatles. It’s a comedy but it also poses some unexpectedly profound questions about honesty and success. I also recently really enjoyed reading The Beekeeper of Aleppo, which is a beautiful but sad novel about the war in Syria, displacement, and what the idea of home means.

Eklego Design has its conceptual origins in my time as a student. When I was studying interior design in New York, my roommate was studying at NYU. She received a journal entitled ‘Eklego.’ Something about the word struck me, so I looked it up and it translated into the meaning “to pick out, choose, select for oneself.” When Dina and I first met, we decided we liked the name and went on to use it as our company name. We began by working out of my grandmother’s dining room. We started operations as an architecture and interior design service in 2000, but by 2005 we had decided to add a retail arm to incorporate the pieces we were designing and manufacturing locally. In 2008, our third partner, Heba El Gabaly, joined us. I moved to London in 2014, and Dina and Heba have continued to expand and oversee the daily management of Eklego.

I believe that Eklego offers something unmatched in the market, especially for people who appreciate good design and believe in local design and production. Our niche is that we can offer a one-stop design solution for both homes and commercial spaces, and one that combines distinctive, modern designs with an awareness of Egypt’s artistic and architectural heritage.

People often don’t understand how much time it takes to come up with a good design. It is one of the biggest misconceptions when it comes to our business.

I believe that the more we start drawing on local resources and materials in Egypt, the stronger our industry will be. Mohamed Said, the founder of Ebony and Ivory, introduced me several years ago to a professor who has managed to turn environmentally damaging burned palm trimmings into a viable alternative to cheap, low-grade imported wood. If this project takes off (we have 13 mn palm trees in Egypt), then it will be a complete game changer for the furniture industry.

In my free time I love to read, go to exhibitions, and take long walks with my husband. I also try to go to see some theater every now and then, and I’ve been taking sculpting more seriously lately too.

I try to stay organized — the key word being “try” — by constantly writing and updating to-do lists. I also divide my week into different days. So, for example, Mondays are for reviewing emails, corresponding with work colleagues, and writing the weekly to-do list. Tuesdays I try to dedicate to creativity, visiting museums and exhibitions to seek inspiration for products and projects. Wednesdays and Thursdays are all about wrapping up the week, and finally Friday is my enjoyment day, where I sculpt in stone from 10 am to 4 pm.

The best piece of business advice I’ve ever been given was that you should do what you love with passion, focus on doing it well, and everything else will follow. It was very wise advice, given to me by the father of one of my best friends, and it had a very formative impact on my life. And of course, both of my parents instilled a strong work ethic in my sister and me, as they led by example when we were growing up.