CIB enters Kenya + Damietta LNG deal falls through

Good morning friends, and welcome to the first workday that (for many of us) will not be fueled by that sacred morning cup of coffee.

The Madbouly Cabinet has relaxed some of its covid-19 restrictions for the month of Ramadan, including shortening the nighttime curfew by one hour to run from 9pm CLT-6am CLT. The curfew previously began at 8pm.

Shopping malls and retail outlets are now allowed to open on weekends, but are required to close their doors by 5pm, while restaurant customers will now be allowed to place takeaway orders in-store, Prime Minister Moustafa Madbouly said on Thursday.

Also operating again (albeit with limitations) as of today:

• Real estate registry offices will reopen for a limited number of unspecified services;
• Traffic departments will be allowed to resume the issuance of car licenses;
• Family courts will also be allowed to resume inheritance sessions.

Most other citizen services remain closed for the holy month. This includes passport services for citizens and work and residence permits for foreign residents.

You will be required to wear a face mask if you do decide to venture to a traffic department, the Interior Ministry said.

Resumption of domestic travel could be announced within a couple of weeks: The government is currently assessing how to resume domestic tourism, including air travel, and is expected to make a decision on the matter within the first half of Ramadan, cabinet spokesman Nader Saad said on Sada Al-Balad’s ‘Ala Mas’ouleety (watch, runtime: 22:59).

The return of inbound and outbound passenger flights appears to be further afield, since this decision would depend on international tourism as a whole, Saad said. Cargo flights continue in the meantime.

Schools also remain closed and the government will make an announcement in the second half of Ramadan on the scheduling of final examinations for schools and universities.

EGX trading hours remain unchanged through Ramadan: Trading for the EGX and Nilex will continue to run covid-shortened hours of 10am to 1:30pm each day, according to an EGX statement.

So, when do we eat? Maghreb is at 6:29pm today, and you’ll need to have consumed your final cup of coffee no later than 3:42am — fajr is coming one minute earlier every day through the end of the Holy Month.

Ramadan aside, here’s what’s making our brains spin at the start of the workweek:

Pundits think we still haven’t seen the bottom of the stock market, leaving the Financial Times and activist investor Carl Icahn on the same page. “The divergence between the flying stock market and the dying economy is so extreme it is leaving many analysts scrambling for explanations,” the salmon-colored paper notes, suggesting there’s little reason for global shares having “erased half the stock market’s fall since late February” in what some had originally said was a bear-market rally. Icahn, meanwhile, suggests shares are “overvalued” and that he’s preparing for “some big downdrafts” yet to come in markets. In the meantime, he’s “hoarding cash, shorting commercial real estate and preparing for the coronavirus to wreak more havoc.”

The WHO is warning against so-called immunity passports that would allow people who show antibodies to the novel coronavirus to “travel or to return to work assuming that they are protected against re-infection. There is currently no evidence that people who have recovered from COVID-19 and have antibodies are protected from a second infection,” the international body said in a scientific brief.

Are we overlooking lessons from the “forgotten pandemic” of the 1960s when policymakers simply … let everyone get infected? Maybe. But even then, experts aren’t on the same page about what those lessons may be, the Wall Street Journal suggests.

COVID-19 IN EGYPT-

Egypt now has 4,319 confirmed cases of covid-19 after the Health Ministry reported 227 new infections yesterday. The ministry also said that another 13 people had died from the virus, taking the death toll to 307. We now have a total of 1,450 confirmed cases that have since tested negative for the virus after isolation or hospitalization, of whom 1,114 have fully recovered.

An Egyptian doctor died at a quarantine hospital in Aswan on Friday, becoming the country’s fourth healthcare worker to die from covid-19, according to a Medical Syndicate statement.

Attempts to block covid burials are now punishable by law: The House of Representatives passed amendments to the Infectious Diseases Act that would make attempts to block the burial of covid-19 victims punishable by imprisonment and a fine of EGP 5k-10k, according to Ahram Gate. The amendments also grant the health minister the authority to require individuals to wear personal protective equipment if deemed necessary, and impose a fine of EGP 300-5k on violators.

The Red Sea governor has allowed tourist cruises and boats to resume operations as long as they take the “necessary precautions,” including frequent sanitization, according to MENA.

Hundreds more repatriated from Netherlands, MENA: More than 360 Egyptians arrived in Marsa Alam International Airport on three flights from the Netherlands, Bahrain, and Morocco on Thursday evening, Al Masry Al Youm reports. All returnees are in quarantine for a 14-day period.

More flights coming: Air Cairo sent a flight to Indonesia yesterday, and EgyptAir will run two flights to the US in early May to bring home citizens, MENA reported.

Private carrier Nile Air is pitching the Sovereign Fund of Egypt and a number of banks to buy stakes in the company to shield it from going under, Managing Director Yousry Abdel Wahab told the local press. The National Bank of Egypt and Banque Misr have reportedly been in talks with a handful of private airlines over zero-interest loans, as they appear to refuse the soft loans offered by the Central Bank of Egypt since the entire sector is at a standstill.

The Egyptian Football Association is getting USD 500k in relief from Fifa as national associations struggle to remain afloat, Fifa said in a statement. The football body has set up a USD 150 mn fund to support 211 partner football associations globally.

DONATIONS-

Telecom Egypt, Orange, and Etisalat will provide quarantine hospitals with 12 ventilators and medical and protective equipment for 200 healthcare workers in a joint initiative, according to a CIT Ministry statement.

Telecom Egypt is paying for 1 mn online medical consultations for Egyptians in collaboration with digital healthcare platform Altibbi, according to Al Mal. Patients can use the Altibbi website or app to communicate with a doctor, and a hotline (16445) has been set up for people unable to use the internet.

The Insurance Federation of Egypt has donated EGP 10 mn to the Tahya Misr Fund, according to Al Masry Al Youm

Blom Bank donated EGP 10 mn under the Federation of Egyptian Banks’ initiative to support families of workers who were affected by the covid-19 pandemic, according to Al Mal.

ON THE GLOBAL FRONT-

The WHO has launched a “landmark collaboration” to speed development of effective medication, tests and vaccines, and ensure accessibility, Reuters reports. The leaders of France, Germany, South Africa, and countries throughout Asia, the Middle East and the Americas participated in a virtual meeting held on Friday, but the US, China, India and Russia were notably absent.

Germany has given the green-light to clinical trials of a corona vaccine in human beings, DW reports. Scientists in the UK did the same last week.

Red states in the US begin to relax lockdown: Several Republican states in the south announced plans to ease lockdown restrictions in defiance of advice issued by medical experts, Reuters reports. Gyms, beauty salons and some workplaces reopened in Georgia and Oklahoma on Friday, following Florida and South Carolina, which both moved last week to reopen parts of their economies.

Some Canadian provinces lightly hit by the virus have announced how they will phase-in the reopening of their economies. New Brunswick is now permitting two-household gatherings and limited carpooling, but suggested businesses, restaurants, and offices have another 2-4 weeks to go. Saskatchewan will start reopening in five phases starting on 4 May.

Saudi Arabia is partially lifting today its curfew across the country, with the exception of Mecca, which remains under a 24-hour curfew, according to the Saudi Press Agency. The kingdom is also allowing malls and retail stores to resume operations outside of curfew hours, while restaurants, cafes, cinemas, and other recreational businesses will remain closed.

MACRO-

The World Bank predicts global remittances will see their “sharpest decline in recent history” this year due to the pandemic, with the MENA region expected to see its remittance inflows drop 19.6% before rising a modest 1.6% in 2021. Remittances — particularly transfers from workers in the oil-exporting GCC countries — are a key source of foreign currency for Egypt, but are likely to witness downward pressure this year as companies come under pressure from the slump in oil prices.

US earnings season picking up steam: Wall Street heavyweights Microsoft, Apple, and Amazon, as well as energy giants ExxonMobil and Chevron, are set to report their quarterly earnings this week, reports Reuters. You can find the full earnings calendar here.

Will Big Tech come out stronger? Wall Street valuations are pricing in a rebound in the tech industry this year as stay-at-home and social distancing orders led to a spike in digital demand, Richard Waters writes for the Financial Times.

Facebook launched its own multi-person video chat feature, pushing Zoom’s shares to drop 10% last week, according to the Financial Times. The social media platform, which will release its earnings this week, said it will soon roll out its Messenger Rooms feature at no charge on Facebook and Messenger

You know it’s end times when a Republican administration is considering part-nationalization to keep the country’s oil sector afloat: The US government could purchase equity stakes in American energy companies to prevent mass defaults amid historically low oil prices, Treasury Secretary Steven Mnuchin said, according to Reuters. The plan is understood to be one of several under consideration, and it is not known which companies the government would seek to invest in.

Saudi Aramco has begun scaling back production ahead of 1 May when the agreement between Opec, Russia and the US to cut output is due to start, a Saudi official said. “Rather than an effort to quick-start the output cuts, the gradual reduction reflects the several days that Aramco needs to adjust production safely,” says Bloomberg. Saudi-led Opec and its allies, which together make up Opec+, agreed earlier this month to cut global production by 10% in a failed attempt to prevent the market from crashing further.

BofA thinks gold could be trading at USD 3k / oz — double its current value — by October 2021, according to Bloomberg. This would come as massive liquidity boosts by central bankers around the world to stimulate the virus-hit economy means “fiat currencies could come under pressure,” prompting people to seek gold as a better store of value.

MAKING IT IS BACK- The second season of our podcast on building a great business in Egypt has started, just in time to keep you entertained on Thursdays during Ramadan.

Our first guest is Mohamed El Kalla, CEO of CIRA, one of the largest private-sector education companies covering everything from K-12 through university. The business has grown from a small family concern into an EGX-listed giant.

Tap or click here to listen to the first episode on: Our website | Apple Podcast | Google Podcast. We’re also available on Spotify, but only for non-MENA accounts.

Making It is made possible thanks to the generous support of: Our friends at CIB and the United States Agency for International Development (USAID).

The majority of the nation’s talking heads are on hiatus for the month of Ramadan, save for power couple Lamees El Hadidi (Al Kahera Alaan) and her lesser half Amr Adib (El Hekaya), both of whom focused largely on covid-19 updates.

Curfew reduction has doctors’ blessing: Cabinet’s crisis management committee consulted medical professionals on the potential added risk of spreading the virus before moving to reduce curfew hours during Ramadan, Cabinet spokesman Nader Saad told Lamees. The government has no intention to go ahead with a total lockdown, which would spell disaster for the country’s economy, Saad reiterated (watch, runtime: 16:38).

Not impressed with a Singapore study suggesting the outbreak in Egypt could end next month: Adib called up Misr University pharmaeconomics lecturer Islam Anan for his two cents on a study from the Singapore University of Technology and Design that predicts the pandemic’s life cycle in Egypt will end around 20 May. Anan suggested that the study may be inaccurate because the data used does not match the Health Ministry’s daily case tally reports and the study does not clarify its data sources (watch, runtime: 9:01)

Adib also took note of the release of some 4k prisoners on Sinai Liberation Day yesterday (watch, runtime: 1:49).

DISPUTE WATCH- The resolution of a long-simmering dispute over a shuttered Damietta LNG plant has fallen apart despite an agreement reached last month, according to a cabinet statement. Parties to the dispute include Spanish gas firm Naturgy Energy Group, Italy’s Eni, and the Egyptian government.

Why does this matter? First, the dispute was closely followed by investors in Egypt’s energy sector, though that concern was largely swept away as the Sisi administration reached a settlement with all parties. More importantly, the Damietta plant is a key part of Egypt’s strategy to grow its natural gas exports as it emerges as the Eastern Mediterranean’s premier energy hub. The plant has been closed since 2012, when supply of gas was shut off amid disruptions in the wake of the political events of the previous year. Its reopening would have expanded Egypt’s ability to export natural gas to European markets.

What happened? A number of unspecified conditions outlined in the agreement remain unmet, Naturgy said in a Madrid bourse statement (Spanish) (pdf). Chief among them, it seems, is that the reopening of the LNG plant has stalled because of covid-19 restrictions on business operations, a source familiar with the matter told Reuters.

Naturgy will now resume its claim in a USD 2 bn arbitration case against the Egyptian government but says it is still open to an “amicable” settlement. The World Bank’s International Center for Settlement of Investment Disputes had already ruled in Naturgy’s favor in the case in 2018.

What was the latest before things fell apart? Eni and Naturgy had reached an agreement last month with the Egyptian government that would have seen Naturgy exit Union Fenosa Gas (UFG), its joint venture with Eni. Naturgy would have taken USD 600 mn for most of UFG’s assets outside Egypt and its equity in the Damietta LNG, with the equity passing to the remaining stakeholders in the plant. Following Naturgy’s exit, the plant would be 50% owned by Eni, 40% by Egyptian Natural Gas Holding Co. (EGAS) and 10% by the Egyptian General Petroleum Company (EGPC).

S&P Global Platts Analytics had long been pessimistic about restarting operations at the Damietta plant, even if Eni were to find an export market for its Zohr gas production, it said. It argued that the global gas glut had made it increasingly complicated to negotiate the terms between Eni and EGAS on the utilization of the plant. “The breakdown of the [agreement] further bolsters our view that it's highly unlikely that Damietta will see a 2020 restart," Platts Analytics LNG analyst Samer Mosis said.

Meanwhile, Eni is planning to cut back spending across its footprint after it reported a 94% drop in 1Q2020 profits to EUR 59 mn as demand collapsed thanks to the covid-19 pandemic. The energy giant will slash its capital expenditure across its markets by a further 30% after it cut spending plans in March and canceled a EUR 400 mn share buyback. The company will slash its exploration and production budget with cuts in Egypt, the UAE, and Indonesia (as well as oil fields in Iraq and LNG projects in Angola), CEO Claudio Descalzi said on a conference call, according to Bloomberg.

Eni had increased its investment in its JV Agiba in March by USD 60 mn to USD 430 mn to increase exploration and development operations in the Western Desert and the Gulf of Suez this year. It was also set to begin commercial operations on the Zohr natural gas field’s 15th well last month, Oil Minister Tarek El Molla said in February.

M&A WATCH- CIB acquires majority stake in Kenyan bank as it continues its expansion outside Egypt: CIB has purchased a 51% stake in Mayfair Bank, the Central Bank of Kenya said on Friday. The bank, which is the country’s fourth-smallest lender, focuses on high net worth individuals and the corporate market, and controls 0.17% of the market with only five branches. Mayfair will capitalize on CIB’s “skills, resources and infrastructure” to help it scale up, the central bank said. The CBK said the acquisition will help boost trade and investment between the two Comesa members. CIB’s strategy with Mayfair will center on back-to-back trade finance.

CIB has injected USD 35 mn in additional capital under the agreement, Chairman Hisham Ezz Al-Arab told Reuters. CIB plans to expand the bank by prioritizing corporate banking, trade finance and the retail sector, turning it eventually into a hub for trade finance in Kenya and neighbouring countries, he added. CIB had announced in November its agreement in principle to the acquisition pending approvals, without disclosing the bank’s name at the time.

The purchase is part of CIB’s expansion into Africa: Mayfair “is a small bank but this is our idea of growing in Kenya, a very well regulated market,” and the agreement comes as part of the bank’s Africa expansion plans, Ezz AlArab told the newswire. CIB opened a representative office in Ethiopia last April as part of its strategy to expand into East Africa.

M&A WATCH- Beltone Financial sells US subsidiary Auerbach Grayson: Beltone Financial Holding has completed the sale of its 60% stake in New York-based brokerage Auerbach Grayson to an unnamed group of investors, the company said in a statement (pdf) on Thursday. The investment bank said the sale will be finalized once it secures approval from the US’ Financial Industry Regulatory Authority. The move is part of Beltone’s strategy to restructure with a focus on investment banking and expanding its non-banking financial services in Egypt and neighboring markets, the statement said.

Background: Beltone announced its intention to offload its majority stake in Auerbach Grayson earlier this year, citing “large losses” it had incurred since purchasing the stake in 2016.

M&A WATCH- Americana Egypt appoints new financial adviser to conduct valuation ahead of Adeptio MTO: The Egyptian Company for International Tourism Projects (Americana Egypt) has selected an unnamed financial adviser to conduct a fair valuation of the company ahead of Adeptio’s mandatory tender offer (MTO) for minority shares in the company, according to an EGX disclosure (pdf). The fair valuation is expected to be completed in 45 days before being submitted to the Financial Regulatory Authority (FRA) for approval. The news comes six months after the regulator rejected Adeptio’s previous EGP 3.9 per share offer price, and suspended its financial advisor FinCorp for three months because of its “unfair” fair value assessment.

Background: The FRA ordered Adeptio to submit an MTO to buy shares in Americana Egypt in early 2019, after they gained indirect ownership of the majority of the company due to acquiring a 67% stake in Kuwait Food Company (Americana) in June 2016. Adeptio claimed that did not require an MTO submission, but after a few rejected appeals submitted an initial offer price of EGP 3.9 per share based on Fincorp’s study. Americana’s minority shareholders signaled they would only be satisfied with an offer in the range of EGP 24 per share, and demanded that Adeptio revalue the company.

STARTUP WATCH- Food delivery startup Mumm raises undisclosed pre-series A funding from Alex Angels: Egyptian online food platform Mumm has raised undisclosed funding from Alex Angels as part of an ongoing pre-series A round, Menabytes reports. The startup was founded in 2015 and delivers homemade food to customers. It has recently shifted its focus to partnering with companies, launching late last year a meal subscription service for corporates and SMEs that allows them to offer meals to their employees at discounted rates. Mumm raised seed investment from A15 in 2016, along with USD 200k from 500 Startups in 2017 and 2019.

EARNINGS WATCH- Maridive & Oil Services’ net profits dropped 81% y-o-y in 2019 to USD 2.6 mn from USD 14 mn the previous year, according to an EGX disclosure (pdf). Revenues dipped 2.6% y-o-y to USD 202 mn from USD 208 mn in 2018, mostly due to costs rising to USD 148.4 mn in 2019 from USD 125.2 mn in the previous year. The company began negotiating with its creditors last month to postpone loan repayments as the twin threats of covid-19 and the collapse in oil prices take their toll on the business.

MOVES- Tarek Nadim has stepped down from his position as Maridive’s board chairman, citing health reasons, the company said in a disclosure to the bourse (pdf). Shahira Zeid has been tapped as Nadim’s interim replacement until a new board is elected.

The Weekend in Macro: Surprising no-one, European flash PMIs suggest horrific contraction in April: The IHS Markit Flash Eurozone Composite purchasing managers’ index, which combines the services sector and factory output, reached an all-time low of 13.7 in April, down from 26.4 in March.

Europe’s service and manufacturing sectors nearing collapse: Services “bore the brunt of the impact from the lockdown measures,” with the reading for the services PMI coming in at 11.7 in April — its lowest level since July 1998 — as the hospitality and travel markets grounded to a near halt, according to the flash PMI release. “Manufacturing also saw a record” as the factory gauge more than halved to 18.4 during a month which brought about “unprecedented damage,” IHS Markit Chief Economist Chris Williamson was quoted as saying.

Developing countries could witness a deeper recession than initially expected if consumption and investment don’t rebound quickly enough post-corona, senior World Bank officials have warned, according to Reuters. In a baseline scenario, the bank expects a “grim” 2% economic contraction in developing countries, but the situation could be much worse, leading to a drop of up to 3%, if investment and consumption remain curtailed.

Diaspora bonds could be a way out of the FDI slump, the bank said. According to its projections, the bonds — sold by emerging countries to their expats abroad — could help offset the sharp 37% expected fall in emerging-market FDI this year, potentially raising up to USD 50 bn a year.

Oil rigs stuck in limbo in the North Sea — a symbol of the global economy? Ok, so these aren’t dolphins in the Venice canals or herds of Thai elephants crossing a road. But these pictures by HE Media of oil rigs in the North Sea’s Cromarty Firth — dubbed the sleeping monsters of Scotland's oil industry — are symbolic of the global economy’s sudden slowdown amid oil market volatility. They also have an ethereal beauty, viewed in pale gray light.

It’s a relatively quiet newsday for Egypt in the international press, with the country getting nods in pieces in the Financial Times and New York Times how covid-19 is disrupting Ramadan and daily life here.

Also making headlines: Concerns about the spread of the novel coronavirus in the nation’s prisons (Reuters) and a look at the new administrative capital (CNN).

Emerging markets are about to be hit by a crisis of epic proportions, with a public health emergency coming as investors retreat and foreign exchange reserves shrink. In this Bloomberg podcast (listen, runtime: 50:50), senior fellow at the Council on Foreign Relations Brad Setser discusses some of the key measures he uses to track the severity of the situation, as well as potential avenues for damage control.

What is to be done? Setser looks at which countries are particularly vulnerable — think those with oil dependent economies, low foreign exchange reserves or those at risk of debt default prior to the virus — and addresses which tools the IMF has in its arsenal, why its reserve asset (the Special Drawing Right) wasn’t deployed more quickly, and whether some form of health-related conditionality may be attached to loans. The cast also examines the medium- and long-term impacts of reduced tourism and more localized supply chains as economies the world over try to find new ways of balancing resilience with efficiency.

Pompeo calls on Egypt to protect US detainees during covid: US Secretary of State Mike Pompeo called for detained US citizens in Egypt to be kept safe during the covid-19 pandemic in a Thursday phone call with Foreign Minister Sameh Shoukry, according to a statement issued by the US State Department. Three US citizens detained in Egypt were reportedly mentioned by name in a letter sent by US senators to Pompeo earlier this month, asking him to press for the release of US citizens held in certain countries who they deem at heightened risk of contracting the virus.

Also in the Washington file: USAID is giving Egypt an additional USD 6 mn grant to finance development in northern Sinai, according to a statement from the Ministry of International Cooperation.

On the foreign trade front:

• Egypt's exports of iron and steel fell 35% in 1Q2020 to USD 138 mn, Youm 7 reports, citing official figures.
• Exports of jewelry and gemstones rose 58% in the same quarter to USD 793 mn up from USD 503 mn, according to state news agency MENA. Our top export market: The UAE, which took in about 70% of jewelry exports worth USD 558 mn.

The 39 MW Zafarana wind farm will be taken offline next year as its 20-year life span comes to an end, the local press reports, citing an unnamed Electricity Ministry official.

The UAE’s Dana Gas confirmed in a bourse statement (pdf) on Thursday that it intends to use proceeds from the (reportedly delayed) sale of its Egyptian assets to pay down outstanding sukuk due in October. Dana had initially expected the sale to be completed by the end of March, we reported earlier this month. The Emirati company recently bought back roughly US 17.8 mn of its sukuk and has some USD 379.6 mn outstanding.

Ora Developers and Gemini Global Developments have received ministerial approval to develop the 15.7-feddan second phase of its flagship Zed Towers development, according to the local press. The New Urban Communities Authority had approved the master plan for the EGP 35 bn Zed Towers project in Sheikh Zayed last year. The 165-feddan project must be completed within 10 years.

The National Railway Authority has received final approval from the Hungarian Export-Import Bank and Russia’s Roseximbank to finance the purchase of 1.3k railcars from Russia’s Transmashholding, Railway Gazette reports.

The National Bank of Egypt has sold EGP 62 bn of its 15% fixed-rate certificates to some 340k customers, Chairman Hisham Okasha told Youm7. Banque Misr, meanwhile, sold EGP 30 bn-worth of the certificates thus far, Chairman Mohamed El Etreby told Hapi Journal. The state-owned banks began offering the certificates on 22 March to maintain cash liquidity in EGP.

The Suez Canal Economic Zone (SCZone) has handed over a proposal to the Madbouly Cabinet to introduce new or improved investor incentives, SCZone Chairman Yehia Zaki said, without providing further details. Zaki made no explicit link between the proposed new incentives structure and the covid-19 outbreak.

Etisalat has launched its Over the Top (OTT) streaming app Etisalat TV in cooperation with the Emirati E-Vision, according to the local press. Subscribers will be able to access 109 channels and more than 13k hours of on-demand TV.