Staff bid to double-dip is delaying Bank Audi’s acquisition of NBG

Look for talk of 5G in Egypt to be in the headlines today as the Ministry of Communications and Information Technology kicks off the International Telecommunications Union’s World Radiocommunications Conference running today through 22 November in Sharm El Sheikh. The ITU are the people who allocate global radio spectrum (used by, for example, the 3G or 4G radio in your mobile phone or tablet) as well as satellite orbits — and agree on the technical standards that allow “networks and technologies to seamlessly interconnect.”

Why it’s a big deal? Well, aside from the fact that the delegates are, effectively, the people who make sure you get the interwebs? Expect 3.5k participants from 140 countries including more than 50 cabinet-level figures to attend. It’s the first time in 20 years that the gathering takes place outside ITU headquarters.

You can learn more about the conference here or read the CIT ministry’s statement here (pdf).

Also today:

German Foreign Minister Heiko Maas will arrive in Cairo to discuss the situations in Syria and Libya with President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry, the German embassy in Cairo said in a statement.

The Munich Security Conference Core Group Meeting in Cairo wraps up today. The meeting brings together senior foreign policy decision-makers from around the world to discuss regional security issues, political developments in Sudan, and the African Continential Freetrade Agreement, Ahram Online says. We re-cap yesterday’s discussions in brief in this morning’s Diplomacy + Foreign Trade section, below.

The CIB PSA Women’s World Championship and CIB Egyptian Squash Open Men’s Platinum at the Giza Pyramids are on their fifth day today. The world’s biggest squash event will award the women’s champion nearly USD 49k and the men’s world champion nearly USD 46k.

We have an all-Egyptian women’s quarter-final: Raneem El Welily and Nour El Tayeb will face off in the quarter-finals after they dispatched in straight sets the UK’s Alison Waters and compatriot Salma Henry, respectively. World number five Nouran Gohar, also of Egypt, advanced to the final eight after beating Belgium’s Tinne Gilis.

In the men’s draw: Egypt’s World No.1 Ali Farag secured his spot in the quarter-finals yesterday after beating fellow Egyptian Mazen Hesham in three sets. Fares Dessouky also advanced, defeating India’s Saurav Ghosal. Marwan El Shorbagy and Mostafa Asal will fight it out for a quarter-final spot today, while World number three Karim Abdel Gawad will play Hong Kong’s Leo Au.

Round three matches continue today, with women’s matches kicking off at the Pyramids starting at 17:30pm and men’s games starting at 12 noon at the Shooting Club Six of October and, according to the PSA website.

Other dates to pencil into your agendas this week:

• The Egyptian Medical Expo to Africa openedf yesterday and runs until tomorrow. The three-day event brings together seven countries to strengthen African medical cooperation in production and expertise, according to a Cabinet statement.
• A B2B conference for German and Egyptian companies will take place today in Cairo. Click or tap here to register.

Across the pond, all eyes will be on the Fed tomorrow and Wednesday, when the Federal Open Market Committee is widely expected to deliver the third consecutive interest rate cut. The real question is whether this week will see the end of what Fed Chairman Jay Powell has said is a “mid-cycle adjustment,” or whether the central bank will keep its foot down in the months ahead, Bloomberg says.

Both options carry risks: After suggesting a limited period of rate cuts, indicating an extended easing cycle risks undermining the central bank’s credibility and widening divisions among Fed officials, a growing number of whom are questioning the need for further cuts. But suggesting otherwise could trigger a market tantrum at a time when demand for durable goods is falling and US-China trade relations continue to be uncertain. The FT has more.

Why are there so few women working in monetary policy? Economics is often an unfriendly profession for women, research shows, with high levels of [redacted] harassment and frequent instances of being interrupted or facing hostile questioning during meetings, the New York Times reports. Women economists are also less likely to have their research published by central banks, and this can directly impact whether or not they are promoted. The US Fed, the Bank of England, and the European Central Bank held a gender equality conference last week to look into the underrepresentation of women at central banks, but largely failed to address how to fix the gender imbalance at the top. While central banks have been taking steps to ensure more women —and those from diverse backgrounds — are hired and promoted, the issue of advancement to top leadership positions is said to be one that is outside their control.

Emerging markets are on a roll but investors should be mindful of rising local volatility: Falling US interest rates and hopes for a US-China trade agreement have led EM currencies and stocks to new three-month highs. But investors should be more discriminating in their approach to EMs amid increasing political tensions in the Middle East and Latin America, Anders Faergemann, senior money manager at Pinebridge Investments, tells Bloomberg. “Overall, EMs are benefiting from the global macro backdrop, but we advocate taking a more selective approach and monitor each country flare-up independently.”

• Lebanon: Demonstrations extended into their eleventh day yesterday, as protesters formed a 170-km human chain between the northern city of Tripoli to Tyre in the south, the Guardian reports. Schools and banks have remained closed for more than a week as protesters shrugged off the government’s emergency economic package last week.
• Argentina: Left-wing populist Alberto Fernandez is poised to defeat pro-market incumbent Mauricio Macri in the presidential election tomorrow. Bondholders are facing the prospect of a 20% haircut if Fernandez wins.
• Chile: The Chilean president yesterday sacked his cabinet after more than one mn people took to the streets of the capital on Friday, the BBC reports.

Dubai construction boom could bring economic “disaster”: Dubai faces an economic disaster unless it hits the pause button on constructing new homes, one of the emirate’s top developers has said. “We’re entering a crossroads now,” Damac Properties PJSC Chairman Hussain Sajwani told Bloomberg. “Either we fix this problem and we can grow from here or we are going to see a disaster.” Sajwani fears that the banking sector could soon face a liquidity crisis if house prices continue to fall. The value of homes has fallen around 30% over the past five years amid a construction boom that has continued in spite of low demand.

Put down your pitchforks and make peace with the robots, WSJ tells us: While the growing awareness of widespread automation has been seen in many quarters as a bad thing, the Wall Street Journal suggests we may all be worse off if we react by destroying the machines. History shows us that countries without the ability — or the will — to innovate have lagged behind their tech-embracing counterparts — and still play catch up to this day. Yes, robotics and AI will erase jobs. The solution is to find alternative sources of employment for humans, rather than resorting to Neo-Luddism, the journal says.

The talking heads were squarely focused on the untimely death of the king of the Daeshbags: Abu Bakr Al Baghdadi. Every host with no exception took note of yesterday’s biggest global news story, and spoke to experts and researchers to break down what the US-led operation might mean for the terror organization.

Al Baghdadi died in a raid by US special forces in Syria’s Idlib on Saturday evening, US President Donald Trump confirmed in a nationally televised speech yesterday. Trump had tweeted on Saturday evening that “something very big has just happened,” without elaborating at the time.

The first word goes to the smartest woman on nighttime TV: Al Kahera Alaan’s Lamees El Hadidi hosted Al Ahram Center for Political and Strategic Studies terrorism expert Ahmed El Behairy for a lengthy segment (watch, runtime: 17:19). Lamees’ lawfully wedded husband Amr Adib, meanwhile, chatted with Islamic researcher Sameh Eid over the phone (watch, runtime: 4:43).

The White House takes from the Obama playbook? El Behairy pointed to similarities between Saturday’s operation and the handling (and White House media management of) the Obama-era raid that killed Osama bin Laden in 2011. “The same [US special] forces targeted Al Baghdadi,” El Behairy said. The timing of the attack was also similar, Behairy said, noting that both Obama and Trump managed to catch themselves some international terrorists prior to an election. (We can’t help but call El Behairy on this one: There is still over a year to go before Trump has to face the voters, and the bin Laden raid took place a full 18 months before the 2012 election.)

Did Turkey just give Baghdadi to the US as a quid pro quo? Masaa DMC’s Eman El Hosary spoke to Heba El Koudsy, Washington bureau chief of the London-based Asharq Al Awsat newspaper, who suggested that Turkey could have exchanged intelligence on Baghdadi’s whereabouts in a quid-pro-quo (watch, runtime: 13:02).

Expect the story to continue shaping the international news cycle today. See, for example, coverage in the New York Times | Financial Times | Wall Street Journal | Reuters).

The aftermath of last week’s rain was the second most popular topic. El Hadidi spoke to MPs Moataz Mahmoud and Mahmoud El Husseiny about last week’s torrential rain, both of whom criticized the government’s handling of the crisis. Although Egypt’s infrastructure isn’t equipped for such volumes of water, they claimed that the situation could have been mitigated had the sewer network been cleared. And things might get tricky for the local development minister, after Mahmoud said he would question him about the crisis in the House (watch, runtime: 26:14).

While we urban dwellers were suffering, our North Sinai compatriots were a little more thankful: The heavy rainfall was a welcome event in cities across North Sinai as some 5 bn cubic meters of water were stored in the Rawafaa Dam near Gabal El Halal to the south of Arish. Governor Mohamed Shousha congratulated his people in a phone call with El Hekaya’s Adib (watch, runtime: 4:40).

Also getting a bit of attention: President Abdel Fattah El Sisi’s meetings yesterday with officials on the sidelines of the Munich Security Conference Core Group in Cairo (watch, runtime: 3:48) and ongoing protests in Lebanon (watch, runtime: 0:55).

M&A WATCH- Are NBG’s unresolved pay disputes with its staff threatening its acquisition by Bank Audi? The National Bank of Greece (NBG) is still to resolve a disagreement with its staff over its pending sale to Bank Audi, which is threatening to stall the acquisition, sources with knowledge of the matter told the local press.

What’s going on? NBG employees are alleging the changes are tantamount to wrongful termination and invoking article 122 of the labour law (pdf), claiming the bank must pay them the equivalent of severance (two months’ salary for each year they have worked at the company) before NBG is sold to Bank Audi. The CBE has reportedly made its sign-off on the transaction contingent on the resolution of the dispute. NBG asked the central bank for a grace period until the end of October to reach an agreement with its staff.

NBG’s legal advisor says nobody’s losing jobs or pay: Matouk Bassiouny, which is acting as NBG’s legal counsel on the transaction, explained in a memo to NBG staff yesterday that the current staff’s jobs are safe — with no change in salary — and that only employees who choose not to accept transfers to Bank Audi on conclusion of the sale would be eligible to receive buyouts, according to Al Mal.

CBE to intervene? If things aren’t smoothed over — by the end of October, we imagine — the CBE could intervene in the dispute, the sources said.

Background: NBG had decided to exit the market last year as part of a wider plan to reduce its overseas presence under an EU-supervised restructuring. Bank Audi had announced it will acquire NBG's Egypt arm, including a book of “mostly of Egyptian-risk loans, deposits and securities (total assets of c. EUR 110 mn), a branch network of 17 branches and c. 250 employees,” and has been awaiting CBE's approval to complete the transaction.

Samih Sawiris, seven investors plan EGP 1 bn NBFS firm: Samih Sawiris is setting up a EGP 1 bn non-banking financial services firm alongside seven other business figures from the banking and construction industries, sources told Al Mal. The new firm, MLF, will provide leasing, mortgage financing, and factoring services. Founding members include SIAC Construction CEO Nehad Ragab, Egyptian Businessmen’s Association Vice Chairman Fathallah Fawzy, Mabany Edris CEO Mohamed Edris, Kandil Glass head Khalil Kandil, and Dorra Real Estate Development Chairman Mohamed Hassan Dorra and Managing Director Omar Dorra. MLF is expected to begin operations before the end of the year, the sources said.

INVESTMENT WATCH- Nestlé will invest EGP 600 mn in three years to set up a new bottled water factory, and spend EUR 30 mn next year to add two production lines to its existing facility near Banha, the company’s business executive officer Rasem Dabbas told the press. Dabbas made no mention of the new plant’s timeline or planned location. The expansion to the standing facility will boost its production capacity of Nestlé and Baraka bottles by 20%.

Jordanian authorities sign off on Uber-Careem merger: Jordan’s Industry, Trade, and Supply Minister Tariq Hammouri last week approved Uber’s planned USD 3.1 bn acquisition of Careem after deciding that the transaction would have “limited” negative effects on the market, the ministry said in a statement (pdf). Uber and Careem’s combined market share of Jordan’s ride-hailing industry does not exceed 40%, which the ministry says still leaves space for the country’s traditional taxi services and other ride-hailing services to compete. The ministry will allow the companies to operate a maximum of 10k vehicles in its combined fleet, with fares set at 15% higher than regular taxi fares.

Jordan is now the second country to approve the acquisition, after Emirati Minister of Economy Sultan bin Saeed Al Mansouri granted his “unconditional approval” to the transaction in June.

What’s going on with the Egyptian end of the merger? The Egyptian Competition Authority (ECA) has been a long-time critic of the merger, threatening each company with a fine of up to EGP 500 mn since before they had even reached an agreement. The ECA said that the agreement could “lead to a significant impediment on effective competition in the markets” and said it would take a decision after 60 working days of receiving official confirmation of the merger. It then granted itself another 60 days to study the merger in July, but we have yet to hear any updates. The ECA said at the time that both Uber and Careem have been notified of the extension, and have committed to operating separately until a decision is reached.

Glovo wants half of Egypt’s delivery market: Delivery app Glovo plans to more than double its share of Egypt’s online delivery market to 50% within 18 months, up from its current 21% share, sales manager Mustafa Kamel told Reuters in an interview. Glovo plans to expand to 16 cities by the end of 2020, and had said earlier this month it intends to invest EUR 5.1 mn in Egypt next year to finance this expansion. The company had suspended operations in Egypt earlier this year, saying at the time it was exiting the market altogether, only to relaunch its services five weeks later. The Egyptian Competition Authority accused Glovo and Delivery Hero of anti-competitive practices following its exit, and ordered Glovo to resume operations in Egypt within 30 days.

EARNINGS WATCH- Juhayna Food Industries’ 3Q2019 profit fell 8% y-o-y to EGP 111 mn, the dairy producer said in its earnings statement (pdf). Revenues during the quarter increased 6% to reach EGP 2.04 bn.

MOVES- Swvl co-founder and COO Mahmoud Nouh (LinkedIn) has resigned to “pursue new personal goals,” the company told Menabytes last week without disclosing further details.

Emerging market state-owned enterprises’ rising debt burdens are a “growing concern” for government finances, as they currently account for “a significant portion” of all EM debt securities, the IMF said in its Global Financial Stability report (pdf). EM state-owned enterprises (SOEs) have capitalized on “easy global financial conditions” over the past decade to consistently and substantially increase their debt. Fitch Solutions had warned in a webinar we attended last week that a borrowing binge in EMs following the 2008 global financial crisis has created an “Achilles heel” for EMs in the form of USD-denominated debt exposure.

Just how much debt are we looking at? A lot. If we’re just looking at fully government-held SOEs, the amount of debt issued from these companies accounts for a third “of the entire EM sovereign hard currency bond universe.” Expand the scope a little to include SOEs in which governments are just majority owners, and we’re looking at debt accounting for around half of issued corporate securities.

The bigger issue is that the accrued debt hasn’t exactly helped performance: “The use of debt appears to have been less productive in many EM SOEs that have increased leverage but have become less profitable,” the report says. Oil and gas SOEs, for example, have seen their leverage ratios almost double since the global financial crisis (whereas private sector firms’ leverage has been more or less stable over the past 15 years), but have seen a noticeable drop in profits in the process. And to make matters worse, SOEs’ large debt burdens has seen their creditworthiness taken a significant hit.

Which countries are most at risk? Breathe a sigh of relief — Egypt is not among those singled out by the report as having a problem with over-indebted SOEs. In countries such as Mexico, Russia, Kazakhstan, and Malaysia, SOE debt is hovering around 10% of these nations’ GDP. The IMF cautions that this can have a spillover effect into sovereign spreads, particularly if these SOEs run into financing issues that necessitate government intervention, which could be problematic for governments’ fiscal health, especially in highly indebted countries.

Photo essay highlights Egypt’s female breadwinners: London-based Egyptian documentary and portrait photographer Lina Geoushy’s photo essay, “The Breadwinners,” brings to light how women housekeepers in Egypt act as the sole wage earners in their families but are still subjected to patriarchal practices at home, according to her official page. Geoushy says her work aims to portray her subjects in a position of power and leadership, and hopes to enact changes to the Unified Labor Law to grant them greater legal protection.

It’s a wasteland in the international press this morning: Business leaders in the mining sector aren’t too thrilled with the royalties in the newly-passed Mineral Resources Act, telling Al Monitor that continuing the system will not develop the country’s mineral resources. Hamdy Zaher, former chairman of the Export Council for Mining Materials and Industries, said that a royalties system “will change nothing,” and blamed the underdevelopment of the sector on the government’s failure to create a comprehensive management strategy. Yousef Rajhi, CEO of Pharos Gold Mines, said that the government should introduce a more competitive tax system and change the law to address different minerals separately.

The WSJ crunched the numbers, and it turns out diversity does have a positive impact on company performance: The Wall Street Journal created a diversity and inclusion ranking for S&P 500 companies that uses 10 metrics, including the age and ethnic diversity of the company’s employees, how many women occupy leadership roles, and board composition. The ranking, developed by the journal’s environment, social, and governance research analysts, found that the top 20 most diverse companies outperform the least diverse firms when it comes to share price and operating results. The Financial Times had previously probed the correlation between diversity and performance, but in less quantitative terms.

Who’s the best at diversity? The system grants each company a score from 0-100, with 100 being the most diverse and inclusive. Progressive Corp. sits at the top of the ranking, with a score of 85, followed by JPMorgan Chase with a score of 80. The financial sector as a whole was found to be the most diverse, with an average score of 50.4, followed by communications services firms. Interestingly, the ranking found that large companies were more likely to be inclusive and diverse, either because small companies have less money to dedicate to diversity research or because large companies are more likely to face scrutiny for not being inclusive enough.

El Sisi talks terrorism, regional security at Munich Security Conference Core Group: President Abdel Fattah El Sisi discussed regional security and antiterrorism efforts with several officials participating in the Munich Security Conference (MSC) Core Group in Cairo, according to an Ittihadiya statement. Meeting attendees discussed the ongoing crises in Libya and Syria, as well as general security challenges on the African continent. The three-day conference brings together senior foreign policy makers from around the world to discuss regional security issues, such as the latest political developments in Sudan and the African Continential Freetrade Agreement. Attending the conference are MSC Chairman Wolfgang Ischinger, Arab League Secretary-General Ahmed Aboul Gheit, and a number of African and Middle Eastern foreign ministers. The conference concludes today.

Chinese traders will begin importing Egyptian oranges, grapes, dates, and beetroot after authorities confirm that the produce meets Chinese standards, China’s ambassador to Cairo Liao Liqiang said, according to Al Masry Al Youm.

Egypt looking to set up logistics zone in Djibouti: The government is in “serious talks” with Djibouti to set up an Egyptian logistics zone in the country, head of the Egyptian Commercial Services Authority Ahmed Antar said, according to the local press. The zone would be geared towards increasing Egypt’s exports to the rest of the continent.

Sharm El Sheikh Airport will begin receiving flights from London for the first time in four years in December after the UK last week lifted its flight ban, the Civil Aviation Ministry confirmed in a statement. One weekly chartered flight carrying 168 passengers will then continue until March 2020. We noted yesterday that tour operator Red Sea Holidays announced hours after the ban was lifted that it would launch weekly charter flights from late December. TUI, meanwhile, is looking to start flights next summer. The restrictions were brought in after the downing of a Russian airliner in October 2015.

The Communications Ministry is planning to inaugurate in three months Egypt’s first artificial intelligence (AI) research center in Smart Village, the minister’s AI advisor Saly Radwan told the press. The center will be operational in 1Q2020, and will relocate to a new R&D center in the new administrative capital at some point in the future. Little is known about the ministry’s broader research goals, but part of its work will focus on teaching machines to receive and follow commands in Arabic. The government is currently working with Japan, France, Germany and China to develop its AI research base. It hopes that the technology will help it meet its Vision 2030 development goals in the education, agriculture, water, and health sectors.

The European Investment Bank (EIB) is looking at extending a EUR 90 mn loan to the government to upgrade the Tanta-Mansoura-Damietta railway line, according to its website. The project is expected to cost a total of EUR 193 mn, and involves double-tracking a 65 km stretch of line and installing an automated signaling system. It could also provide additional investment to renovate railway stations, and establish a new freight yard and railway link to Damietta port.

In related news: An unnamed US company has offered to finance and supply new safety equipment worth USD 45 mn to the Railway Authority, a source told Al Mal. The equipment would be used to detect faulty lines and conduct safety tests, and the company would provide the finance via a soft loan, the source said, without providing further details.

Raya Holding for Financial Investments subsidiaries Raya Electronics, Aman Financial Services, and Aman Microfinance are planning to issue EGP 500 mn of asset-backed securities, according to the local press. CIB and the National Bank of Egypt will manage the securitization process and Dreny & Partners Law Firm will act as legal counsel. The issuance is pending review and approval from the Financial Regulatory Authority.

EFG Hermes have closed a EGP 169 mn short-term bond issuance for Premium International for Credit Services, the local press reports. The sale was fully subscribed by a number of unnamed institutions on the primary market, and the securities will be listed on the stock exchange soon. The consumer finance firm’s only product is Premium Card, which provides installment plans for consumer goods.

Emirates NBD is extending a USD 28 mn medium-term loan to American Group subsidiary Farm Frites to finance the company’s new USD 40 mn french fry production facility, according to Al Mal.

The Federation of Egyptian Industries’ (FEI) handicrafts division is looking to implement a EGP 3.3 bn plan to develop and promote the industry over the next five years, division head Mossad Omran tells Al Shorouk. The division has submitted its plan to the Trade and Industry Ministry, but has been waiting on approval for nearly a year.

The government could increase spending on health and education, according to two cabinet statements (here and here). The two ministries have asked for an undisclosed amount of extra funding from the FY2019-2020 budget for their projects, which include building hospitals and providing 26k tablets to second and third grade public school students.

Egyptian national football team captain Ahmed Fathi is reportedly threatening to leave the team over coach Hossam El Badry’s decision to give Mo Salah the captain’s armband, according to Ahram Online. The decision breaks with tradition in the national team, which traditionally gives the captaincy to the oldest player. Fathi is currently the team’s most senior member, while Salah is fourth in line, behind Abdalla Said and Ahmed Hegazy.

“Run through history” at Giza Pyramids half marathon next year: Egyptian sports management company the TriFactory is holding its second annual half marathon at the Giza Pyramids on 22 February 2020, which will include 6 km, 10 km, and 21 km races. Early-bird registration is now open for the event, and will be available until 22 December, 2019.