Talk of a cabinet shuffle has reached a fever pitch amid expectations the House will reconvene on Wednesday

The words “cabinet shuffle” are on everyone’s lips today as MPs, pundits and the press alike joined the chorus of voices suggesting we could see as many as 12 new faces around the cabinet table as soon as Wednesday. That’s when MPs could be recalled from their current recess to discuss the shuffle.

The potential cabinet shuffle is but one of a number of big stories that are making headlines today in an unusually busy Monday. We have chapter and verse on all of it in this morning’s Speed Round, below.

The latest on the Aramco IPO: Saudi banks are not facing liquidity problems after regulators eased lending limits for local investors to increase subscription for the Aramco IPO, the central bank governor told Reuters yesterday. The central bank is monitoring the sector on a daily basis amid concerns that the IPO could cause a liquidity squeeze.

This came as Aramco officials arrived in Dubai to drum up support among investors the offering. Bloomberg has more on the Gulf roadshow.

Emerging market bonds will continue to curry favor with investors as low and negative-yielding debt persists in the US, Europe and Japan, analysts tell MarketWatch. Despite the risks involved with investing in EMs — demonstrated perfectly this year by Argentina, Lebanon and Ecuador — they are one of the only places investors can make an adequate rate of return, especially following the recent wave of rate-cuts across the world.

As the Federal Reserve and the ECB press pause on stimulus, EM central banks could keep cutting: A host of EM central banks — including Brazil, India, Indonesia and Turkey — could continue to cut rates next year if economic growth does not rebound, Morgan Stanley economists have forecast, according to Bloomberg.

Real interest rates will remain high even if central banks continue easing, meaning that EM debt is unlikely to lose its luster. “Although the yield on EM local currency bonds hit a historic low in October, the asset class still offers the best value of all major bond markets – better yield, attractive currencies and valuations,” Luca Paolini, chief strategist at Pictet Asset management, told MarketWatch.

US private equity is on the defensive as politicians, campaign groups, and Taylor Swift fans rail against its growing economic power. The Financial Times says lobbyists are stepping up efforts to portray private equity in a positive light as Democratic presidential candidate Elizabeth Warren promises to outlaw leveraged buyouts and Congress increases its scrutiny of industry practices. Then there are the Hollywood screenwriters complaining about private equity’s entrance into talent agencies, and the Carlyle Group, whose Twitter profile has been under attack by legions of Taylor Swift fans for its role in a dispute between her and her former music label.

The man that private equity firms would love to see win the Democratic nomination just officially entered the race: Former New York Mayor Michael Bloomberg has officially launched his Democratic bid for the presidency. “I’m running for president to defeat Donald Trump and rebuild America,” he wrote on his campaign website. “We cannot afford four more years of President Trump’s reckless and unethical actions … If he wins another term in office, we may never recover from the damage.”

Money aside, the going will probably be tough for Bloomberg: The bn’aire man of Wall Street is faced with the task of building support among a Democratic base fired up against corporate overreach and economic inequality. Bloomberg’s USD 37 mn ad buy has already been slammed by leading progressive candidates Bernie Sanders and Elizabeth Warren as an attempt to buy the nomination. The Associated Press has more.

*** It’s Blackboard day: Blackboard is the first of our ‘verticals’ — specialized editions that focus on individual industries. For Blackboard, that focus is the business of education in Egypt, from pre-K through the highest reaches of higher ed. Each edition of Blackboard will mix news, deep dives, analysis, raw data (plus context) and a touch of humor with the goal of making industry players think — and of getting non-experts up to speed. Our goal: To give you the inside track, whether you’re an investor or operator in the field or just passingly interested in the topic. Blackboard appears every Monday in Enterprise right after Egypt in the News in the place of our traditional industry news roundups.

Missed us last week? Catch our feature last Monday on why the demand from international schools for foreign teachers remains high, despite the impact on COGS of FX-denominated salaries in a challenging macroeconomic climate.

In today’s issue: Blackboard looks at the growth and popularity of college prep businesses — education service providers, whose primary focus is to help students gain admissions to universities — and what that growth tells us about where Egyptians are looking to access higher education.

Speculation about an imminent cabinet shuffle — and a suggestion that the Investment Ministry could be rolled into a Supreme Investment Council — reached fever pitch on the talk shows last night: We have the breakdown in this morning’s Speed Round, below.

Also on the airwaves: Local government elections could be pushed to 2021. Elections for municipal officers are likely to be pushed to 2021 as the names of candidates for both the Senate and House of Representatives will be at the polls next year, MP Salah Hasaballah said on Ala Mas’ouleety (watch, runtime: 3:04). Political pundit Abdel Moneim Said told Al Kahera Alaan’s Lamees El Hadidi last week that effective government reform in the country should start with devolving more power to the traditionally limited and underutilized local government.

Other topics from last night’s talk shows:

• Planning Ministry out with report on administrative reform plan: The Planning Ministry released a report outlining a plan to digitize government offices, reports Masaa DMC’s Eman El Hosary (watch, runtime: 4:52).
• Nubians disapprove of Sawiris hotel project in Aswan’s Amun, Klada islands: A planned project by Samih Sawiris-led Orascom Development Egypt and state-owned General Company for Tourism and Hotels (EGOTH) to build an opulent hotel on the Amun and Klada islands in Aswan has been on hold for nearly 10 years amid conflict with the locals, the b’naire tells El Hadidi (watch, runtime: 7:43).
• CBE to begin collecting mortgage payments electronically: The Central Bank of Egypt will start collecting installments for subsidized home loans taken out as part of its mortgage financing program electronically, says Hona Al Asema’s Reham Ibrahim (watch, runtime: 5:36).

Could we see a cabinet shuffle as soon as Wednesday? House Planning and Budgeting Committee Secretary Essam El Fekky has joined a host of other MPs suggesting that the House of Representatives may hold an extraordinary meeting as early as Wednesday to approve a cabinet shuffle. Analysts expect MPs to come back early from recess to sign off on the appointment of as many as 12 new faces around the cabinet table.

Not idle chatter? The speculation kicked off last week after the head of state the state-owned news institution Akhbar El Yom, who presents as being close to President Abdel Fattah El Sisi, suggested that change was coming.

The possibility of a shuffle featured prominently on last night’s talk shows. Al Kahera Alaan’s Lamees El Hadidi recapped the state of play and noted that long-serving Social Solidarity Minister Ghada Waly will be the first to leave cabinet after having been named the next executive director of the UNODC (watch, runime: 5:18).

Outspoken MP Moustafa Bakry told El Hadidi in a call-in that he is aware of “information” suggesting the Investment Ministry could be rolled into a Supreme Investment Council.

Bakry also suggested the House will discuss the shuffle on Wednesday, saying it is the only day of the week in which Speaker Ali Abdel Aal will be in town. The president will likely ratify the shuffle later in the same day. The shuffle will see as many as 10 new faces around the cabinet table, Bakry added, suggesting we may also see “major changes” in several state bodies, as well as “a shift in attitude.”

Lamees’ husband, El Hekaya’s Amr Adib, also spoke of the expected shuffle, saying that Egypt needs ministers skilled in the political side of the trade and who are “fully biased” toward the poor to mitigate the spillover effects of the ongoing economic reform program (watch, runtime: 15:23).

So, who’s out? There’s growing speculation that the supply, trade and industry, health, and environment ministers will be among those shown the door, and it is unclear whether the Supreme Investment Council would have a cabinet-level head or be chaired by the president or prime minister.

Rania Mashat, whose E-TRP program stands out as one of the success stories of the ongoing reform program, is widely seen as continuing in government service, but could move to the central bank or take over a new cabinet-level portfolio, press reports suggest.

Who’s getting a new seat at the table? Deputy Social Solidarity Minister Nevine El Kabbag is in the running to replace Ghada Waly as the latter leaves for her UN post, Al Shorouk reports, while SME Authority head Nevine Gamea is allegedly the frontrunner for the trade and industry minister’s job. Police Major General Rady Abdel Moaty, currently the head of the Consumer Protection Authority is reportedly a candidate for supply, while Cairo U agriculture faculty researcher Mohsen El Batran is said to be favoured for agriculture.

Planning Minister Hala El Said is also said to be in the running for additional responsibilities as she’s a candidate to add deputy prime minister to her business card.

Actis has confirmed it is in the running to acquire a stake in a combined-cycle power plant: Private equity giant Actis has formally submitted a letter of intention to acquire a stake in the Siemens / Orascom Construction / Elsewedy Electric combined-cycle power plants, Sherif El Kholy, partner and head of Middle East and Africa at Actis, tells Hapi Journal. Sources had told Bloomberg earlier this month that Actis is among those bidding for the stake, but the company had declined to comment at the time. Actis is competing alongside France’s Engie, China Datang Overseas, Blackstone Group’s Zarou, and Edra Holdings. Electricity Ministry sources had said previously that Zarou had submitted the best financial offer, making it the top contender.

Actis is looking to get a piece of all three power plants once Egyptian sovereign wealth fund Tharaa begins to offer up stakes in the other two. According to El Kholy, Actis wants to hold at least 51% of the three plants in Burullus, the new administrative capital, and Beni Suef.

Background: Tharaa CEO Soliman said earlier this month that an agreement to sell a stake in only a single plant is expected to be finalized in less than a year. Stake sales in the other two plants would then follow. He also said that the fund is planning to acquire 30% of the plants’ equity, and offer the remaining stake to an international investor as part of its efforts to encourage foreign participation in the economy. Post-sale, the shareholders could establish a joint venture that would then sign a power purchase agreement to sell the plants’ output to the government. There are two other scenarios that the fund is looking at, including one in which it takes a 60-70% stake in the plants, leaving a minority stake for the private sector. The three 14.4 GW plants were co-built by Siemens, Orascom Construction, and Elsewedy Electric, and were inaugurated in July 2018.

IPO WATCH- TAQA Arabia to IPO 30% next year, exact timing to depend on market conditions: Qalaa Holdings is planning to sell 30% of subsidiary TAQA Arabia’s shares in an IPO as early as next year,sources close to the transaction tell Al Mal. TAQA’s EGX debut is currently slated for 1H2020, but could be pushed to the second half of the year if the market conditions are not favorable during the first six months of 2020, the sources say. Qalaa Chairman Ahmed Heikal had told Reuters in an interview last month that the IPO could go ahead as early as 2Q2020.

The TAQA IPO will see the partial or full exit of some shareholders, including Saudi Arabia’s Al Rajhi Group and El Rashed, the sources say. Qalaa is planning to retain controlling stakes in the company and has no plans to sell down its stake during any IPO, a company official told Enterprise earlier this year.

Advisors: Qalaa has tapped EFG Hermes and HSBC to manage the IPO.

PRIVATIZATION WATCH- Key conditions for HHD 10% stake + management revealed: Private investors interested in taking over management at Heliopolis Housing and Development (HHD) will receive up to 20% of the state-owned company's annual profits in management fees, according to sources who briefed the local press yesterday about the draft management contracts and prospectus for the 10% stake sale. Shares will be sold at market value at the time of purchase, the sources said.

The prospectus will go on sale later today for EGP 150k (EGP 171k with stamp tax) after it was approved, along with the draft contracts, at an extraordinary general assembly on Saturday.

Investors will have until 1pm on 14 January to submit their bids, HHD said in a bourse disclosure (pdf). The opening of the bids will be done on the same day. The deadline for submitting enquiries will be 18 December when the company will hold a meeting to answer any questions.

Submission requirements: Bidders will need to hand over technical and financial offers. The technical part will outline the bidding company’s project history and propose a business development plan and a corporate structure, as well as attach CVs of the bidder’s management team. The financial offer, meanwhile, will need to include a plan for target revenue growth and a figure for proposed compensation. Sources confirmed that both private equity firms and alliances of private equity firms and real estate developers may submit bids.

Background: HHD invited private equity firms and private real estate developers in October to bid for a 10% stake with management rights after backing away in April from a secondary stake sale. Plans were then resurrected in July to offer a 25% stake in 4Q2019, before Tawfik told us that the transaction was unlikely to close this year.

Who’s in the running? Eight companies were initially reported to have been interested in HHD, including SODIC, EFG Hermes, BPE Partners, Emaar Misr, and Orascom Development.

M&A WATCH- EFG Hermes, Evercore tapped to lead United Bank sale: The Central Bank of Egypt (CBE) has appointed EFG Hermes and New York-based Evercore to act as advisors on the expected sale of state-owned United Bank, according to a statement (pdf). The EFG-Evercore consortium was the top pick from five contending consortiums, the statement says, without disclosing further details. The local press had reported earlier this year that CI Capital and Perella Weinberg Partners had partnered for the bid, while Beltone Financial had gone in with Rothchild & Co.

Background: CBE Governor Tarek Amer said in July that the advisors selected for the sale of United Bank would determine the timeline for the sale. The CBE owns 99.9% of United Bank’s shares, having created the institution through the merger of a number of smaller institutions. Amer had said last month the sale is “moving forward.”

M&A WATCH- Rx Healthcare Fund finalizes Al Mottahedoon Pharma acquisition: EFG Hermes’ Rx Healthcare Fund has finalized its acquisition of an 80% stake in meds producer Al Mottahedoon Pharma, according to Al Mal. The fund purchased shares from individual investors, the newspaper says, without providing further details. The value of the transaction was not disclosed, but local press reports from earlier this year had suggested it would cost Rx somewhere around EGP 360 mn.

Advisors: ARC Capital acted as financial advisor on the transaction, while our friends at ALC were legal counsel to the sellers.

M&A WATCH- Titan Cement to acquire IFC minority stakes in Southeast Egypt, Europe businesses for EUR 81.8 mn: Cement producer Titan Group has agreed to acquire the International Finance Corporation’s (IFC) minority stakes in all of Titan’s subsidiaries in Egypt and Southeast Europe in a EUR 81.8 mn transaction, according to a bourse disclosure (pdf). The acquisition includes IFC’s 17.28% stake in Alexandria Development Ltd., which in turn holds an 88.93% stake in Alexandria Portland Cement.

IPO WATCH- An IPO may be in Gourmet Egypt’s future, founder and CEO Jalal Abu Gazaleh told Making It, Enterprise’s first podcast. The food retailer and manufacturer also has regional expansion on his mind something, he said, in an interview that also dives into how Gourmet started, how it has used private equity funds to grow — and how it survived the float of the EGP.

You can listen to the full episode here on our website or try Apple Podcast or Google Podcast. You can also listen on Spotify if you are outside of MENA. The local edition of the streamer doesn’t presently offer podcasts.

Egypt’s tourism sector is robust enough to absorb the shock of Thomas Cook’s liquidation, says Al Mashat: The recent liquidation of British tour operator Thomas Cook won’t make a significant dent in Egypt’s tourism industry, Tourism Minister Rania Al Mashat said in an interview with Hotelier Middle East. Other tour operators are already in the process of picking up the company’s business in the country, mitigating the impact of any short-term potential slowdown. Al Mashat stressed that Egypt’s tourism sector is robust and growing, which she largely attributed her ministry’s sectoral reform program and efforts to create a brand that connects with travelers from all over the world.

The ministry’s new system to determine hotel star ratings, announced in September, is a bid to increase Egypt’s competitiveness as a destination in line with international standards, Al Mashat added.

A steady industry recovery: In an interview with Bloomberg last week, Al Mashat said that the number of tourist arrivals in Egypt are on track to reach 2010 peak levels by the end of next month, with revenues having already rebounded to previous record levels of USD 12.5 bn in FY2018-2019.

DEBT WATCH- NUCA moving to issue another EGP 10 bn in securitized bonds to fund new cities: The New Urban Communities Authority (NUCA) is planning to securitize up to EGP 10 bn of receivables from partnered private sector real estate developers in the second half of its current fiscal year (January-June 2020), sources from the Housing Ministry said. The authority will use the proceeds to complete projects in new cities, they said, without going into specifics. NUCA is currently calculating how much it is due from the partnership contracts, but will also consider backing the bonds with receivables from auctioned land. NUCA currently has partnerships with developers including SODIC, Palm Hills, Mountain View, Al Ahly for Real Estate Development, Iwan, and Ora Developers.

The news came a day after the authority completed a EGP 4 bn securitized bond issuance, for which Sarwa Capital and Banque Misr acted as lead managers, arrangers and co-underwriters.

INVESTMENT WATCH- Coca-Cola Egypt is planning to invest USD 500 mn over the next three years, General Manager Ahmed Rady said in a video published on the Investment Ministry’s Facebook page (watch, runtime: 1:28). Rady provided no details on the planned investment. The company invested USD 500 mn in Egypt between 2016 and 2019.

EARNINGS WATCH- Cleopatra Hospitals Group reported a 21% y-o-y dip in 3Q2019 net profit to EGP 72.2 mn compared to EGP 91.6 mn a year earlier, according to the company’s quarterly earnings release (pdf). Revenues rose 19% y-o-y to EGP 462 mn, up from EGP 338.3 mn in 3Q2018. On a nine-month basis, Cleopatra’s net profits recorded EGP 170 mn, down 24.5% from EGP 225 mn a year earlier, while 9M2019 revenues increased 21% y-o-y to EGP 1.29 bn, from EGP 1.06 bn last year.

CHG to finalize acquisition of major IVF center in early 2020: The group is expecting to complete its acquisition of a majority stake in one of Egypt’s largest IVF centers by early 2020, the statement says. CHG, which entered into the agreement last June, is yet to disclose the name of the company or the size of the stake. “The target acquisition currently offers an extensive list of services including obstetrics, gynaecology, infertility, andrology, erectile dysfunction, dermatology, reproductive health and laser treatments, nutrition and health coaching, fetal medicine, psychology, and family health services,” reads the statement.

A raid on independent media outlet Mada Masr is dominating the narrative on Egypt this morning in the international press: Security forces yesterday entered the office of independent media outlet Mada Masr, seizing laptops and phones and detaining three staff members, including editor-in-chief Lina Attallah. All three were later released. The news outlet also said that two foreign staff members were taken to their homes to collect their passports, but were also later released. Shady Zalat, an editor who had been arrested on Friday night, was released after the raid. The story is getting prominent play in top-tier international media including Financial Times | Wall Street Journal | Associated Press│Reuters│Agence France-Press│CNN│BBC│The Guardian│New York Times│Washington Post│Deutsche Welle│ABC News│The Independent.

The Committee to Protest Journalists called on the government to end its “retaliation campaign” against the news outlet in a statement on its website.

Also getting coverage in the foreign press:

• Life as a limestone quarrier: Agence France-Presse talks to the laborers risking their lives in Egypt’s limestone quarries for just EGP 100 a day.
• Conditions for Egyptian Christians are “getting better,” says a Bishop from Assiut, according to Christian publication Aleteia.
• Authorities detained a Gulf citizen flying out of Cairo with “dozens” of narcotics in his luggage, the Associated Press reports.
• In search of Queen Nefertiti: Noted Egyptologist Zahi Hawass believes that he may soon find the tomb of Queen Nefertiti in the Valley of the Kings, where a huge excavation is currently taking place, the International Business Times reports.

There’s too much carbon dioxide in the air, so maybe the solution is to sell it: A new method to use CO2 in the atmosphere for products and services, known as carbon capture and utilization (CCU), could help reduce atmospheric CO2 levels, according to Vox. The idea is for industry to use carbon dioxide, which is already a commodity used to create various products, from the atmosphere instead of from the ground, thereby reducing emissions. By some estimates, CCU could potentially become a USD 1 tn market by 2030.

Speaking of fossil fuels: ExxonMobil is bucking the green energy push. ExxonMobil has been ranked the fifth most innovative company in the US by the Drucker Institute at Claremont Graduate University, but its innovation lies in making fossil fuels as competitive as possible, rather than making significant investments in green energy, the Wall Street Journal reports. At a time when industry rivals are focused on solar and wind technology, Exxon believes fossil fuels will remain important for the foreseeable future because of the storage and intermittence limitations of alternative energy sources. It is particularly focused on carbon capture and sequestration, improving the energy efficiency of chemical plants, and developing biofuels with a lower carbon footprint.