It’s a four-day weekend — see you back here on Tuesday

It’s a relatively quiet news day in Egypt as we slide into a holiday long weekend. Banks and the EGX are officially off on Sunday and Monday in observance of Coptic Easter and Sham El Nessim, the Central Bank of Egypt (CBE) announced yesterday. We’re taking both days off and will be back in your inboxes on Tuesday morning.

If you absolutely must indulge in feseekh and ringa this weekend, do it in your own homes. Prime Minister Moustafa Madbouly has ordered officials to be strict in preventing large public gatherings at parks, beaches, and open spaces during Sham El Nessim. Madbouly will announce today the exact measures that will be in force for the long weekend.

As of this morning, it has been 100 days since our last vacation, and it feels like the entire world has changed in the time since.

Oh, and: There are just seven days left until Ramadan.

The news of the morning: There are now over 2 mn covid-19 cases worldwide and the US alone accounts for a third of them, having reported over 636k infections and 28k deaths. The global death toll — which experts think “understates” the magnitude of the situation — has reached 134k. The grim milestone is topping front pages around the world: Wall Street Journal | Bloomberg | Financial Times | New York Times | Reuters.

New Yorkers will need to wear face masks in public starting tomorrow. The governors of Connecticut, Maryland, New Jersey and Pennsylvania have also said residents will need to put on masks as “shelter-in-place” orders are lifted in the coming weeks.

The EGX30 closed down 1.10 % yesterday, with shares worth EGP 967 mn changing hands, about 51% more than the trailing 90-day average. Index heavyweight CIB was down 1.4%, while Heliopolis Housing led decliners (-3.7%) and Orascom Development was the top gainer (+7.4%). The benchmark index is now down 25.9% for the year.

How are the markets looking today? Shares in Asia are slumping this morning on poor US economic data on retail sales, factory output and construction — following the lead of US equities yesterday. Benchmark indexes in Japan, South Korea, Hong Kong and Australia were all in the red at dispatch time and Chinese shares flipping back and forth from green to red. Futures suggest European and US markets will open down later today.

Meanwhile: Pundits are trying out names for what to call the [redacted] we’re living through right now. 1930s: Great Depression. 2007-2009: Global Financial Crisis. Now, we have entries including the Great Shutdown (from the FT) and the Great Lockdown (from the IMF).

COVID-19 IN EGYPT-

Egypt now has 2,505 confirmed cases of covid-19 after the Health Ministry reported 155 new infections yesterday. The ministry also said that another five people had died of the disease, taking the death toll to 183. We now have a total of 751 cases that have tested negative for the virus after identification and isolation / treatment, of whom 553 have fully recovered.

Mosques will remain closed until there are no new cases of covid-19 in the country and the virus is fully contained, the Endowment Ministry said yesterday. The ministry first ordered the closure of mosques on 21 March and later also banned all gatherings, mass iftars and other collective social activities this Ramadan.

Egypt is one of a handful of countries in the region that has not requested a so-called “rapid financing instrument” from the IMF to contain the economic fallout from the pandemic, Middle East and Central Asia Director Jihad Azour said at an online presser yesterday (watch, runtime: 32:51). The IMF is still in “direct contact” with the Central Bank of Egypt and the Finance Ministry should the need for bailout funding arise. Azour said Egypt’s economic reform program and the strength of its FX reserves have helped mitigate the economic impact of the measures being taken to constrain spread of the virus.

Al Mashat talks Egypt’s covid-19 strategy at G24 meetings: International Cooperation Minister Rania Al Mashat discussed Egypt’s measures to contain the spread of covid-19 and curb its effect on the country’s economy during the Group of 24 Ministers and Governors Meetings, according to a cabinet statement. The G24 recommended coordinating a global policy response with multilateral organizations to support individual countries’ efforts to encourage a swift economic recovery, according to a press release (pdf).

Small IT companies are asking ITIDA for subsidized loans to help stay afloat amid the economic fallout from measures taken to curb the spread of the virus that causes covid-19, Al Mal reports. The Information Technology Industry Development Agency is the government agency that promote development of the technology and IT industries in Egypt.

Covid-19 info service for people with hearing, speech disabilities: The ICT Ministry’s Relay Center for People with Disabilities has launched a service to provide people with hearing impairment with advice and information on covid-19 around the clock, according to a cabinet statement. The service is offered through the app Wasel. Android users can download the app here.

DONATIONS-

The Federation of Egyptian Industries’ building materials division is donating EGP 1.3 mn to support doctors and other healthcare workers, according to Al Mal.

Medical syndicates pledge combined EGP 100k in financial support to families of deceased healthcare workers: The Doctors’ Syndicate and the Medical Syndicates Union will each provide EGP 50k to support families of doctors who have died due to exposure to covid-19, according to Ahram Gate. The Medical Syndicates Union will also hand out EGP 20k to any union member who has been quarantined after contracting the virus.

HSBC will provide 34k Egyptians with food and hygiene supplies, including meals for Upper Egypt hospital workers, as part of its USD 25 mn global covid-19 charitable fund, according to a statement (pdf).

ON THE GLOBAL FRONT-

Two of Europe’s biggest economies will remain locked down until May. Germany has extended most restrictions on social life to 3 May, according to the FT. The country has relaxed some restrictions, allowing smaller shops to reopen by Monday and some schools by 4 May, Bloomberg adds. The UK, meanwhile, is expected to announce a three-week extension to the lockdown, cabinet ministers said yesterday. Any easing of restrictions will be gradual and likely to start with certain sectors, as ministers say the country must brace for a “new normal,” officials said, the Financial Times reports.

THINGS WE NEED TO WATCH #1: Food security. Romania — one of Egypt’s biggest source markets for wheat — has ordered a halt to grain exports in a bid to secure local market needs during the pandemic, according to Bloomberg. The country has already harvested and shipped the vast majority of this season’s harvest, but the move could signal challenges to come for importers.

The decision comes as Egypt kicks off its own harvest season, which runs until 15 July. The Sisi administration expects to harvest 3.6 mn tonnes of local wheat, in addition to importing 800k tonnes of the grain to boost strategic commodities, Minister Ali El Moselhy said previously.

THINGS WE NEED TO WATCH #2: It doesn’t look like you’re going to be vacationing in Europe this summer. The European Union has already signaled it is likely to extend until mid-May the closure of its external borders to non-citizens, a move imposed in March. And it could last even longer: France has signaled it thinks the EU should keep both external and internal borders closed until at least September.

Is it the death of Schengen? Already EU members are extending their “temporary reintroduction of [internal] border controls” until fall, according to the European Community’s official tracker. Germany and Norway have said they will extend border controls for inside-EU traffic until at least 11 November, while Denmark will leave controls in place until at least 12 November and France until 30 October.

ROOM FOR OPTIMISM IN EMERGING MARKETS? That’s the takeaway from a great thought paper from Actis’ Ewen Cameron Watt making the point that there will be substantial opportunity for investors in emerging markets despite “reserve losses, foreign exchange depreciation and recessions.” In a post-covid world, “‘Getting back to land’ … takes skill and entails taking calculated risks. Happily, experience points the way to stable cash flows at low prices without excessive liabilities attached. Many of these will or should exist in the countries which make up 80% of world population and resources – that is the Emerging Markets.” Read the paper here (pdf) or watch (runtime: 7:08) Cameron Watt give a video rundown from home.

BUSINESS + MACRO FALLOUT-

Advanced economies are forecast to shrink 35% q-o-q in 2Q2020 — a rate four times as high as a record set during the financial crisis, Goldman Sachs figures cited by Bloomberg predict. While the number of covid-19 cases seems to be peaking globally, this came at an enormous economic cost, and there’s no telling when people could get back to work, Goldman chief economist Jan Hatzius wrote in a client note. The way out: Europe’s policymakers should do much more and developed countries should lend a helping hand to emerging markets, Hatzius said.

More big banks reporting their less-than-stellar 1Q2020 earnings yesterday:

• Goldman Sachs reported a 46% year-on-year decline in profit(pdf), an almost USD 900 mn hit, despite gains from pending equity sales.
• Citigroup net profit fell by nearly half to USD 2.5 bn in 1Q2020 (pdf), compared to USD 4.7 bn a year earlier. The bank set aside loan loss reserves of USD 4.9 bn.
• Bank of America’s first-quarter profit dipped 45% (pdf) to USD 1.79 bn. The bank reported revenue of USD 22.8 bn, matching analyst expectations, and has set aside USD 3.6 bn for covid-related loan loss reserves.

The new defensive play: Tech. Confining bns of people in their homes is great news for tech stocks, the FT notes. Shares of software companies are up about 18% since mid-March.

Major oil producers can cut all they want, but it won’t support prices in the face of massive demand-side shocks, Bloomberg reports. Oil consumption has fallen by about a third this month with much of the world on lockdown.

Saudi Arabia is following the lead of other Mideast countries and selling Eurobonds to plug holes in its finances, Bloomberg reports. This comes after Qatar and the UAE raised USD 17 bn from investors last week, and Israel USD 5 bn earlier this month.

…While keeping itself busy buying football clubs: A group of investors led by the Saudi sovereign wealth fund have reached a USD 300 mn agreement to acquire UK football club Newcastle United, reports the FT. The acquisition announcement came despite the covid-19 knocking the sport into disruption, and halting the Premier League and other tournaments around the world, notes the salmon-colored paper.

Making It is back next Thursday: We’re happy to announce that on Thursday, 23 April, we’re kicking off the second season of Making It — our weekly podcast where we sit down with the CEOs and founders of leading businesses in Egypt and discuss the highlights of their businesses, the challenges they have had to overcome, and what it takes to grow a great business.

Tap or click here to listen to our trailer (runtime: 05:24) for a sneak peek on what you can expect to hear.

Our guests this season run businesses in microfinance, desserts (just in time for Ramadan), fintech, and education, among others.

Putting together another season of Making It in the time of covid-19 was not easy. But we made lemonade: We’ve had to record some of the season’s episodes outside the studio (so you’ll have to forgive us if you hear any dogs barking in the background) and even recorded a few episodes dedicated to the crisis.

Want to catch up on season 1? You have seven days to get caught up with seven CEOs and founders:

• Jalal Abugazaleh, founder of Gourmet Egypt
• Karim El Sahy and Abeer El Sisi from high-profile AI startup Elves
• Karim Awad, group CEO of EFG Hermes
• Fatma Ghali, managing Director of Azza Fahmy
• Hazem Moussa, co-founder and CEO of Sarwa Capital
• Hani Berzi, founder of Edita
• Lina Mowafy, cofounder of TAM Gallery

Catch up on past episodes and listen to the next season here: Web | Apple Podcast | Google Podcast

It was a quiet night on the airwaves, with no single story taking the lead.

Goldman Sachs’ projections that developed countries’ GDP will shrink 35% during the second quarter of the year was on Ramy Radwan’s radar. The Masaa DMC host recapped the highlights of the report, which we note in What We’re Tracking today, above (watch, runtime: 2:13).

Sham El Nessim gatherings: Cabinet spokesman Nader Saad phoned in to Yahduth fi Misr to tell Sherif Amer that outdoor gatherings for Sham El Nessim will not be tolerated — authorities will act as if the country is under a full lockdown during the holiday, he said (watch, runtime: 3:07).

Covid-19 clinical trials in Egypt: Radwan had a chat with Ain Shams University President Mahmoud El Meteini about studies and clinical trials currently underway in Egypt to better understand covid-19 and search for potential treatments (watch, runtime: 18:16). Radwan and Amer also took note of the Health Ministry’s daily case tally (watch, runtime: 1:51 and runtime: 1:58).

FinMin sees Egypt’s financing gap at nearly EGP 1 tn next fiscal year: The Finance Ministry needs EGP 988 bn next fiscal year to close the fiscal gap, up 20% y-o-y from the EGP 820 bn projected for the ongoing fiscal year, according to the recently-released budget forecasts (pdf). The rate of increase is on par with previous years, and the bulk of the gap, nearly EGP 892 bn, will be plugged through local treasury sales. The remainder, EGP 96 bn, will come from eurobonds and loans from foreign institutions. The government will continue its gradual shift to long-term debt, as stated in its debt control strategy, and targets an average tenor of 4.4 years by the end of 2020-2021.

Is this the same as the overall deficit? Not quite. The gap is the sum of the deficit (which is forecast to come at EGP 432 bn) and debt due to mature this fiscal year (EGP 555.5 bn).

Our debt servicing bill will come at EGP 566 bn, which is a minor improvement from EGP 569 bn in this fiscal year's projections. Only EGP 49 bn of the total will go toward servicing loans from abroad.

Interest spending is again the largest single item in the budget, accounting for nearly 33% of this fiscal year’s total expenditures, and just over 36% in last year’s projected spend. The draft budget expects that as the CBE resumes its monetary easing cycle, every 100 bps point rate cut would lead to EGP 10-12 bn in interest savings.

Other noteworthy figures in the forecast:

• Tax collection is expected to grow 12.6% y-o-y to EGP 964.8 bn, accounting for close to 78% of overall revenues (EGP 1.28 tn);
• Revenue from customs, meanwhile, could fall 13.9% y-o-y to EGP 44 bn, and Suez Canal revenues could also dip in case of a contraction in global trade;
• Government investments are forecast to rise substantially to EGP 281 bn, up 33% from EGP 211 bn in FY 2019-2020 forecasts.

Draft budget outlines covid-19 worst case scenario: If the covid-19 outbreak isn’t contained before the start of the fiscal year in July, the budget deficit could grow to 7.7% of GDP, instead of narrowing to the targeted 6.3%, as revenues tied to economic activity could fall short of targets by up to 25%, according to a more conservative scenario outlined in the budget. In this scenario, the primary surplus will also likely come at 0.5-0.6%, down from the project 2% and resulting in a public debt to GDP ratio of 84.5 by June 2021, up from a target of 82.8%.

The ministry has left its growth projections in the budget unchanged at 4.5%, but made it clear that it could revisit them as the covid-19 situation becomes clearer, we noted earlier this week.

Meanwhile, RenCap thinks Egypt’s expectation of 1% growth in the current quarter might be “a bit optimistic,” according to a research note by Ahmed Hafez, head of MENA research at the investment bank. “Assuming a 20% drop in non-essential private demand, a 23% decline in exports, an 8% drop in imports and leaving all else constant, our numbers suggest a 4% y-o-y drop in real GDP, should restrictions last until the end of May,” Hafez writes.

Egypt’s non-oil import bill slashed by a quarter in 1Q2020: Egypt’s non-oil imports fell noticeably to USD 13.81 bn in the first quarter of the year, down 24% y-o-y from USD 18.23 bn in the first quarter of 2019, Trade Minister Nevine Gamea said, citing a General Organization for Export and Import Control (GOEIC) report. Non-oil exports, meanwhile, grew to USD 6.73 bn in 1Q2020, up 2% y-o-y from USD 6.58. This narrowed the non-oil trade deficit by 39%.

INVESTMENT WATCH- Infinity Energy and the UAE’s Masdar are planning to invest USD 750 mn in clean and renewable energy in Egypt and other African markets through their new joint venture, Infinity Power, Al Mal reports, citing sources in the know. Infinity Power, which was set up as an equal partnership in January, aims to acquire assets generating 1 GW of clean energy by establishing new wind farms, bidding in new tenders, and acquiring existing projects, the sources said, without providing further details.

Background: The European Bank for Reconstruction and Development became a shareholder in Infinity Energy in January after investing USD 60 mn in the company. The new investment is earmarked for developing renewable energy and electricity distribution projects as well as electric vehicles charging stations.

INVESTMENT WATCH- GEMS to invest USD 300 mn to open 30 new schools across its footprint: Private sector education outfit GEMS is planning to invest USD 300 mn over the next two-and-a-half years to set up 30 new schools across its footprint, the CEO of its Egyptian arm tells Al Mal. Ahmed Wahby says GEMS wants to more than quadruple its student headcount to 25k -30k from 6k students in the coming few years with the new schools. Wahby did not specify how much of the USD 300 mn would be invested in Egypt.

Background: GEMS announced plans to start producing textbooks and provide training to teachers as part of a five-year expansion plan earlier this year. The company also acquired a majority stake in leading transportation provider Option Travel in 2019, marking its entry into providing transport services to students in the fund’s schools. GEMS Egypt was established in 2018 as a joint fund between EFG Hermes’ Egypt Education Fund and UAE-based Gems Education. It is focused on K-12 education in Egypt and currently owns four private schools, all located to the east of Cairo.

M&A WATCH- Cairo 3A will have to pay nearly 1% more than expected to acquire Egyptian Starch & Glucose after the Financial Regulatory Authority (FRA) mandated an acquisition price of EGP 8.61 per share. The EGP 8.54 per share Cairo 3A had offered was below the average closing price in the three months prior to the offer being made — in contravention of the Capital Markets Act. That implies Cairo 3A will be paying about EGP 431 mn rather than the earlier-projected EGP 428 mn.

What’s next? The company is now reportedly waiting on the Egyptian Competition Authority (ECA) approval before moving ahead with a mandatory tender offer on shares it does not yet own.

State banks sell EGP 82 bn of high-interest savings certificates: National Bank of Egypt has sold EGP 56 bn of its 15% fixed-rate certificates, including EGP 4 bn in one day, Deputy Chairman Yehya Aboul Fotouh tells Masrawy. Banque Misr has also sold EGP 26 bn of the certificates, Deputy Chairman Akef El Maghraby told Veto, bringing the total value of investments in the CDs to EGP 82 bn in under a month. The two state-owned banks began offering the certificates on 22 March to maintain cash liquidity in EGP.

EARNINGS WATCH- Dice reported a 28% y-o-y drop in its consolidated net profits in 2019 to EGP 115.2 mn from EGP 160.1 mn during the previous year, according to an EGX disclosure (pdf). Dice saw revenues rise 3.4% in 2019 reaching EGP 1.57 bn compared with EGP 1.51 bn in 2018.

MOVES- The New York Times’ Declan Walsh will be leaving his post as Cairo bureau chief this summer for a new assignment as the Gray Lady’s chief Africa correspondent, the NYT said yesterday. Walsh has been heading the Cairo bureau since December 2015, when he took over from David Kirkpatrick. The newspaper has yet to name a replacement for Walsh.

The world’s biggest payday loan club agree on debt relief plan for developing countries: Officials of the Paris Club group of creditor countries have agreed to suspend debt payments owed by developing countries to rich governments this year, French Finance Minister Bruno Le Maire told reporters following a video conference of G-7 finance ministers and central bank governors on Tuesday, according to CNBC. A more inclusive G-20 meeting was scheduled yesterday to finalize the anticipated move as this time around the Paris Club of creditors includes other G-20 countries besides the seven usual suspects. One potential obstacle is still-reluctant China, which recently emerged as Africa’s biggest creditor, sources familiar with the process told Reuters this week.

World Bank, IMF (and company) encouraged to join in: An additional USD 12 bn in debt owed by developing countries to the World Bank and other institutions is still being sorted out, Le Maire said on Tuesday, after encouraging multilateral lenders to join the moratorium. The WB and the IMF were the organizations that suggested the moratorium in the first place, but neither have yet committed to debt cancellations beyond this week’s USD 215 mn in relief grants to 25 vulnerable countries through the IMF’s catastrophe trust, CCRT.

This all comes as IMF figures show record portfolio outflows from EMs: Foreign portfolio flows to EMs have witnessed the “sharpest” reversal on record, with some USD 100 bn (roughly 0.4% of GDP) of outflows since 21 January, the IMF predicted in yet another gloomy report after saying earlier this week in its World Economic Outlook that we’re facing the most severe economic crisis since the Great Depression.

The currencies of commodity-producing EMs were also battered — including those of Brazil, Colombia, Mexico, Russia, and South Africa — and EM stock prices plummeted by nearly 20% since mid January, says the fund. This has had a huge effect on emerging and frontier markets’ ability to service debt as they usually rely on foreign inflows and maintaining the strength of their local currencies, making the moratorium all the more necessary.

Tuesday’s shootout between security forces and suspected terrorists is still getting digital ink in the foreign press, with the National noting that Coptic Christian leader Pope Tawadros II mourned the death of the police officer killed in the raid. The UAE has expressed solidarity with Egypt and praised the security forces for the raid, the Emirates News Agency (WAM) reports.

Covid-19 is also a running theme in the foreign press’ coverage of Egypt: The Independent says the stigma of covid-19 is “spreading faster” than the virus itself, while Al Monitor looks at how television production companies are working around the virus to prepare Ramadan mosalsalat. Elsewhere, the Associated Press has a photo essay showing closed businesses and empty streets in Cairo to highlight the economic pinch social distancing measures are causing.

More virtual tours: Egypt is opening its 5,000-year-old tomb of Queen Meresankh III without charge to online tourists to “visit” while in quarantine, the Guardian reports.

The Electricity Ministry has brought online Egypt’s largest wind power plant in the Gulf of Suez, Al Mal reports, citing an unnamed ministry source. The story does not mention the name of the farm, but the specs match Lekela Power’s 250 MW West Bakr plant, which was constructed under a BOO (build, own, operate) framework. The plant cost USD 350 mn.

General Electric has completed the construction of a EGP 100 mn control and monitoring center at the Benban solar complex, sources told Al Mal. The facility was originally due to open this month but has been postponed until 3Q2020 due to covid-19.

Rania Abdalla, founder and managing director of Aspire HR Consultants: 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 Rania Abdalla, founder and managing director of Aspire HR Consultants, a homegrown HR consultancy that works with over 100 multinational and local companies.

I’m Rania Abdalla and I’m the founder and managing director of Aspire HR Consultants (Aspire HRC), which provides HR consultancy and senior management recruitment. We started 12 years ago and we cover Egypt and the Middle East. I’m also an executive board member of IRC Global Executive Search Partners.

I lead Aspire HRC’s strategy and operations, working with the team to make sure we’re on track with our client deliverables. With the current situation, I can focus a bit more than usual on strategic growth and how to expand the services we offer in Egypt.

Working from home (WFH) was not a huge shift for us. Our client meetings, client visits and team meetings have always taken place at the office, but we also offer a flexible model that lets our team members work from home if they feel it will help them be more efficient. Our focus is always on achieving results and client deliverables, irrespective of the hours worked. WFH is all about trust and creating a sense of ownership, so that team members feel very engaged in the company’s growth.

I am very goal oriented. I follow the Wheel of Life system, where every month I set goals in several core areas, including family, business, personal growth, career, exercise (still a work in progress), spirituality, and finance. At the end of the month I record my progress.

Since we’ve been on lockdown, my morning routine begins the previous evening, when I select one of the blue chip projects I’m working on and prepare to work on it, making a list of the resources I need and the people I will need to call, so I can hit the ground running in the morning.

I have my first coffee at around 7am, and read Enterprise for at least half an hour. Then I lock myself away for 90 minutes, working on the blue chip project I selected the night before. I always feel very good once I’ve accomplished this. Then I send out a 2-minute audio message, ‘Aspire Daily,’ for the team. I don’t look at my emails or WhatsApp first thing in the morning, because I know it will be very difficult to then shift my focus to my project. I have another coffee and chat with my family a little before I start checking my emails and reviewing my to-do list.

Online meetings on Zoom and Skype take up a big part of the day. We’ve shifted our client meetings and candidate interviews online, and I also regularly set aside time for meetings with the team. A call at least once a week is important for team focus and morale, but you don’t want to take it too far. Most teams don’t need to have calls twice a day unless necessary.

When lockdown began, I faced WFH challenges too. Limiting my working hours and supporting my younger son with his schoolwork were the main issues, but putting systems in place helped a lot. I now allocate at least an hour a day to one-on-one time with each of my children, where they can choose an activity for us to do together. It might be making cupcakes or coloring, making TikTok videos or playing soccer. My husband, who also happens to be my partner at Aspire HRC, and I have divided up our son’s school subjects so he helps with some and I help with others.

The lessons of 2011 help me keep this situation in perspective. I’ve learned that limiting my news consumption to 30 minutes a day is essential for me to remain calm. And reflecting on the political and economic turmoil we passed through in 2011 reminds me that this situation is not permanent. If we can try to cultivate a mindset of growth, risk appetite, innovation and efficiency, it will enable us to keep going. This approach fueled Aspire HRC’s recent partnership with a US–based company working on Objectives and Key Results (OKR), as well as our appointment of a new partner in the HR consultancy division last week.

Laying good groundwork now will help your company emerge all the stronger. Communicate core decisions to your team so they feel valued and informed, and make sure they are working on something meaningful. Some of our clients are using this time to encourage their employees to think about self-development, which is very smart. This period could lead to a long-term transformation of working culture, so it’s important that people think about how to build their skills and remain agile.