Gov’t to tighten lockdown restrictions during the Eid break with 5pm-6am curfew, shops closed

THE STORY OF THE DAY- We’re facing a 5pm-6am curfew for Eid El-Fitr as part of a series of tighter measures in effect next week to curb the spread of the virus that causes covid-19. The state will then begin easing some measures throughout June, Prime Minister Moustafa Madbouly said in a speech yesterday.

It also seems EgyptAir could resume commercial flights early next month, although Cabinet spokesman Nader Saad said only that an official announcement would be made in early June. We have the full story in this morning’s Speed Round, below.

Did you need a reminder that we’re in the midst of a heat wave? Look for daytime highs of 42-43°C in the capital city, according to the national weather service (pdf), with a chance of scattered showers this week in Cairo, Sinai and the North Coast, Egyptian Meteorological Authority head Mahmoud Shahin told Ahram Gate. The mercury still looks set to fall just in time for the holiday: Look for a daytime high of 32°C on Saturday (the last day of Ramadan) and 31°C on Sunday (the first day of Eid).

So, when do we eat? Maghrib prayers are at 6:43pm and you’ll have until 3:19am to finish caffeinating. Fajr is coming one minute earlier every day through the end of the Holy Month.

** You only have a few days left to tell us covid-19 is impacting your business. We run an annual reader poll asking what you expect of business conditions and the economy in the year ahead. Covid-19 has us thinking that the results of this year’s survey need updating. Take a minute and tell us how covid-19 has impacted your business, whether it’s changed your outlook on the economy, and what you think of WFH. We’ll have the results for you immediately after the Eid.

COVID-19 IN EGYPT-

Egypt has now disclosed a total of 12,229 confirmed cases of covid-19 after the Health Ministry reported 510 new infections yesterday — the highest single-day total yet. The ministry also said that another 18 people had died from the virus, taking the death toll to 630. We now have a total of 3,742 confirmed cases that have since tested negative for the virus after being hospitalized or isolated, of whom 3,172 have fully recovered.

ON THE GLOBAL FRONT-

Covid infections are on the rise in Africa, the New York Times notes this morning, singling out Nigeria as “just one of Africa’s alarming hotspots” and adding that Tanzania and Somalia have also been hard hit. The news comes as some Asian countries are “battling new clusters of contagion,” the Wall Street Journal writes. Among them: China, which has quarantined some 8k people in the country’s northeast.

GLOBAL MACRO-

Fed chairman Jay Powell sat down with 60 Minutes’ Scott Pelley for a wide-ranging interview on the central bank’s emergency measures, predictions for the US economy, and what has to be done to ensure we end up with a recovery and not the Great Depression Mk II.

Here are the key takeaways from the interview:

• The US economy may not fully recover until a vaccine is found: “Certain parts of the economy will recover much more slowly. Travel, entertainment, things that we do that involve being around lots of other people. So for the economy to fully recover, people will have to be fully confident. And that may have to await the arrival of a vaccine.”
• The US economy will see a historic contraction this quarter: The contraction of the US economy in the second quarter “could easily be in the twenties or thirties.”
• And Great Depression-levels of unemployment: “[20-25% unemployment] sounds about right for what the peak may be.”
• Policymakers must do more: “It may well be that the Fed has to do more. It may be that Congress has to do more. And the reason we've got to do more is to avoid longer run damage to the economy.”

• But a note of optimism: “In the long run, and even in the medium run, you wouldn't want to bet against the American economy. This economy will recover. And that means people will go back to work. Unemployment will get back down. We'll get through this.”

You can watch a clip from the interview and read the full transcript here (watch, runtime: 13:46).

Managers of benchmark indexes like the S&P 500 will soon have to decide whether to dump companies likely to keep bleeding because of covid-19, with market volatility compounding an already difficult task. “The S&P 500 may be the world’s most-followed passive index, but covid-19 and its aftermath is going to force its constructors into some very active choices,” DataTrek Research’s co-founder Nicholas Colas tells Bloomberg, estimating that some 30 companies are hovering on the edge of eviction. The index recovered from its 23 March bottom because it’s anchored in tech and healthcare companies, but those working in retail, industry and energy are at risk.

The collapse in oil prices is increasing the likelihood that GCC currencies break the USD peg, which has been in place since the 1970s, the Financial Times reports. The risk that one of the GCC currencies decouples from the USD remains low, analysts say, but the temperature is rising on the Omani rial, which sunk to all-time lows against the greenback in forward markets last month.

This may not be a problem for much longer as the oil market begins to find its feet: US crude rose above USD 30/bbl for the first time in two months as last month’s huge production cuts ease the supply glut, Bloomberg reports.

AND THE REST OF THE WORLD-

The Evil Empire just got bigger: Never one to let a federal antitrust investigation get in the way of its ambition to dominate all of our online communication, Facebook has announced its acquisition of Giphy in a transaction Axios values at around USD 400 mn.

WATCH THIS SPACE- Nomura is going after Japan’s private market, the Financial Times notes. The firm’s new chief executive’s strategy is to “focus on private markets and Japan’s vast hinterland of unlisted companies,” pointing to “Japan’s substantial market for the trading and management of shares in unlisted Japanese companies.”

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: The highly unpopular private tutoring industry is back in a new (and possibly more insidious) form since the Education Ministry made research papers central to assessing students in public schools this year. We look at the businesses that have emerged to cater to this new system, and why the same issues that prompted the rise of private tutors is driving their growth today in the time of covid-19.

Another quiet Ramadan night on the airwaves: Power couple Lamees El Hadidi and Amr Adib pretty much had the floor to themselves. El Hekaya’s Amr Adib took note of the Madbouly government’s new covid restrictions (watch, runtime: 1:48), which Lamees covered in detail (see Speed Round, below).

Egypt faces stricter lockdown measures for the week of Eid El Fitr, then a gradual loosening in June: Egypt will be under a 5pm-6am curfew and all shops will be closed next week as the Madbouly government enforces tighter restrictions designed to curb the spread of the virus that causes covid-19. Prime Minister Moustafa Madbouly announced the measures at a press conference yesterday, saying they would be in effect from Sunday, 24 May (the presumptive first day of Eid) until Friday, 29 May (watch, runtime: 14:53). The full list of decisions is here, and Reuters also has the story.

The nighttime curfew will run from 5pm until 6am next week, although Cabinet spokesman Nader Saad told late-night maven Lamees El Hadidi (watch, runtime: 23:56) that factory workers will be exempt in a bid to limit the impact on factory output. Food deliveries can also continue past curfew hours.

Stores, restaurants and public spaces will be closed. The measures — which are akin to those the government imposed during the Sham El Nessim holiday last month — include a complete shutdown of all malls, shops, restaurants, public parks, and beaches.

Supermarkets, grocery stores and pharmacies will be allowed to open as will beaches on hotel properties that have reopened and that comply with Health Ministry standards, Saad told Lamees.

Public transportation will also be suspended entirely, particularly as the government looks to curb movement between governorates during the holiday. Saad, however, told state TV host Wael El-Ibrachy that the suspension will not include microbuses (watch, runtime 19:17. There do not appear to be restrictions on the movement of personal vehicles between governorates.

Everyone will be expected to wear face masks in “any closed space” starting 30 May, the PM said, which we’re taking as including government buildings, private offices, malls and retail outlets. People will also need to wear masks when using buses, the metro, trains, taxis and ride-hailing services such as Uber and Careem, Madbouly said. Folks choosing not to wear masks could face legal penalties once masks are “available for everyone,” Saad added. The Health Ministry will coordinate the manufacture of cloth face masks at a cost of as little as EGP 5 each that are reusable for up to a month, Saad told El-Ibrachy.

So, when is Eid, exactly? Madbouly didn’t say other than to note that it likely begins on Sunday, but Saad told Lamees that government and other public-sector employees will have the full week off. Cabinet will make it official with a decree today, Saad said.

The Manpower Ministry is expected to announce today how long the holiday will run for the private sector — we expect it to be Sunday-Tuesday.

Eid prayers will be broadcast from inside El Sayeda Nafisa Mosque, as mosques around the country remain closed. Mosques will only be allowed to recite takbeer el Eid through speakers.

Once Eid week is over, we’re back to the same basic set of restrictions as were in place before Ramadan, with the measures being in place until mid-June. This phase, which officially begins on Saturday, 30 May will run for two weeks, Madbouly suggested, and includes allowing shops and malls to open for part of the day and restaurants to operate as they did during Ramadan, (around-the-clock delivery + allowing customers to place takeaway orders in-store). The nighttime curfew will again be shortened to run from 8pm until 6am (one hour longer than at present).

One note: The Health Ministry has pulled from its website a three-phase reopening plan it released last week. Al Dostor is reporting that it has done so because Cabinet is reviewing the document.

In mid-June, the government will allow houses of worship and some leisure activities to gradually reopen. Churches and mosques will be allowed to have limited prayers and ceremonies, Madbouly said. What’s on offer and when will be announced later, he added. The government will also begin gradually allowing sporting clubs and restaurants to reopen in full, provided they follow specific precautions that will also be outlined at a later date.

Thanaweya Amma exams will begin on 21 June, but students will have the option to postpone sitting the exams until next year, Education Minister Tarek Shawki said at the press conference yesterday. Students who do choose to sit for this year’s exams will be required to maintain safe physical distances within the testing rooms, which will also be rearranged to hold fewer students than normal.

Graduating university seniors will sit their final exams starting 1 July, Higher Education Minister Khaled Abdel Ghafar said.

Madbouly didn’t say when Egypt plans to reopen its airspace to regularly scheduled international commercial flights. The flight ban, which has been extended multiple times and was due to expire on Saturday, has been extended for up to two more weeks along with other measures designed to curb the spread of the virus.

Look for an announcement “in the first half of June … on a timeline for the resumption of flights and the precautionary measures that will accompany it,” Saad told Lamees last night, noting that, “sooner or later, flights will resume, particularly as we see European and Asian countries planning to reopen their airspace.”

EgyptAir seems to be taking bookings for next month. The online booking feature on national flag carrier EgyptAir’s website shows round-trip flights to several cities available as of 1 June. The carrier has not said when flights will resume, but we understand that aircrew are being told to expect to be in the air once again in June.

We found flights available yesterday from Cairo to London, Washington, New York, Paris, Dubai, Jeddah, Montreal, Amsterdam, and Casablanca, among others. Flight aggregator Expedia also automatically sets 1 June as the first available flight leaving Egypt. Flights to Beijing, Moscow, Athens, and Vienna, among others, will be available as of 2 June, while a Toronto flight is scheduled for 6 June, with return flights available as of this morning on 11 and 13 June.

There are no flights yet available to Frankfurt, Dublin or Tokyo.

Worth remembering: Unless the requirement is amended after Cabinet review, the Health Ministry foresees incoming tourists being required to produce the results of a PCR test completed 48 hours before they embarked on their flights. There has been no official word on whether travelers arriving in June would still face a 14-day quarantine as is presently the case.

The national flag carrier said yesterday it’s cutting by 10% the salaries of its highest paid employees from May’s paychecks due to the covid-19’s heavy toll on its business, Reuters’ Arabic service reported. This came a day after the government said it could extend a EGP 2 bn lifeline to see the airline through until the flight ban is lifted.

What are other airlines doing? Emirates is operating one-way outbound flights to nine cities — including London, Paris, Milan, Chicago, and Sydney — between this Thursday, 21 May and 30 June. British Airways’ travel information allows travelers who have flights booked up until 31 July to reschedule their tickets or claim a refund, but does not indicate whether this is the date it intends to resume air traffic. Turkish Airlines will resume flights on 28 May.

M&A WATCH- First Bank of Abu Dhabi (FAB) has put on ice its plan to acquire Bank Audi’s Egypt assets due to market conditions, Reuters reports, citing unnamed sources. One source, who said the pact was worth USD 700 mn, told the newswire that it is prioritizing supporting the UAE economy due to the covid-19 pandemic.

We’ll find out more in the coming hours: FAB and Bank Audi will issue a joint statement today or tomorrow confirming the status of negotiations, Masrawy reports, citing sources close to the matter.

Background: FAB said last week that it had completed due diligence on Bank Audi’s Egypt arm and was finalizing its offer. A senior executive said in February that the bank will make a final decision on whether to proceed with the acquisition after completing due diligence. FAB has pursued the acquisition despite the covid-19 outbreak after receiving the greenlight from the Central Bank of Egypt in January.

INVESTMENT WATCH- Innoventures in talks with potential LPs to raise USD 100 mn fund for food startups: Local startup investor Innoventures is raising a USD 100 mn fund targeting food startups and is in talks with potential limited partners including UK’s CDC Group and global giant Blackstone, co-founder Rafik Dalala tells Al Mal. Other potential LPs include EBRD, the International Finance Corporation and an unnamed Canadian investment fund. State-owned National Bank of Egypt and Banque Misr have also been pitched. The story doesn’t say when Innoventures hopes to close the fund or to begin deploying capital.

Background: Innoventures is an Egypt-based VC firm that has invested in early stage startups across a range of industries. CDC has invested in a range of Egyptian blue chips via funds managed by emerging markets PE giant Actis and has also made direct investments and extended tier-2 finance to local banks. Meanwhile, Blackstone has long held an interest in Egypt; its subsidiary Zarou was reportedly a frontrunner to acquire a stake in the Siemens-built combined cycle power plants.

The World Bank approved yesterday a USD 50 mn fast-track facility to bolster Egypt’s covid-19 emergency response capabilities, according to a statement. The facility will focus on improving Egypt’s medical infrastructure through the distribution of essential medical supplies, supporting quarantine and treatment facilities, and ramping up contact tracing capabilities through improving first responder preparedness. A portion of the funds will also be earmarked for public awareness campaigns addressing personal hygiene and social distancing. The bank granted Egypt last month a separate USD 400 mn loan for universal healthcare.

IBRD, IDA are responsible for providing the global support mechanism: The rapid financing facility comes as part of the USD 6 bn International Bank for Reconstruction and Development (IBRD) and the International Development Association’s (IDA) Global Fast Track Facility which aims to assist vulnerable populations through economic and medical support. Funds allocated by the international lenders are based on population size. Egypt qualified for the maximum receivable amount under the facility for a population of 100 mn.

LEGISLATION WATCH- House approves draft Banking Act with new provisions: The House of Representatives has approved the long-awaited Banking and Central Bank Act with several new provisions and shipped it off to the State Council for final legal review, the local press reported yesterday, citing MENA. The legislation, which received a preliminary nod from the House earlier this month, would give the Central Bank of Egypt (CBE) increased discretionary powers to regulate the banking sector. The bill won’t become a law until returned to the House for a final vote by the general assembly. It would also require President Abdel Fattah El Sisi’s signature.

CBE to issue licenses for credit risk guarantee companies: The law’s latest provision, added yesterday after a proposal from the CBE, will put the central bank in charge of licensing companies that want to offer credit risk guarantees. Credit risk guarantee arms must be established for the sole purpose of providing services to protect receivables against defaults and must have a minimum of EGP 50 mn in paid-in and issued capital. Companies interested in setting up credit guarantee arms will be subject to a EGP 100k “inspection fee” and EGP 50k for every other new branch.

Authorization for bank bailouts: The law will allow the CBE to provide short-term bailout funding to struggling banks. This would come in the form of a three-month to one-year loan carrying an interest higher than the market average.

The law will also not affect the current CBE board and the boards of commercial banks, which will only be shuffled to comply with the new stipulations after their terms expire. Under the legislation, future boards and chairmen of state-owned banks will be appointed by the Prime Minister and will be subject to some form of competency approval from the CBE.

Background: The draft Banking Act, which has been in the works since 2017, will replace the 2003 Banking Act, as well as cancel overlapping provisions in related laws. Besides increasing the CBE’s oversight over the sector, the law would introduce measures governing e-payment, fintech businesses, and cryptocurrencies, as well as strengthen data protection and consumer privacy. The legislation would also put in place a 1% levy on bank profits to endow an industry development fund. Banks will have 1-3 years to comply with the new provisions once it’s signed into law. You can find out more here and here.

LEGISLATION WATCH- House Speaker submits Income Tax Act, Public Enterprises Act, others, for committee discussion: House Speaker Ali Abdel Aal submitted six draft laws and two protocols to their relevant committees during parliament’s plenary session on Sunday, the local press reports.

Income tax amendments sent to the Planning and Budgeting Committee: Fresh off raising the income tax exemption threshold in amendments passed last month, the planning committee will discuss a fresh set of changes to the legislation — possibly involving the proposal to cut capital gains tax for state-owned companies we caught wind of last week.

Stamp tax amendments head back to the planning committee: The committee last week decided to temper the government’s proposed cuts to stamp tax on EGX transactions, reducing the tax from 0.15% to 0.075% instead of 0.05%.

The Public Enterprises Act amendments were submitted to the Economics Committee. The legislation would reclassify listed companies in which the government holds up to a 75% stake and a cap on board compensation. Members of the Constitutional and Legislative Affairs Committee, and well as the planning and labor committees will participate in the discussions.

Other bills submitted to relevant committees:

• The suspension of tax on agricultural land for two years will be discussed by the agriculture and planning committees.
• A draft law to set up a fund to support tourism and archeological sites was submitted to the tourism, culture, civil aviation, and constitutional committees.
• The civil disputes resolution bill, the protocol to eliminate illicit trade in tobacco products and a presidential decision regarding IMF funding were submitted to the Constitutional Affairs Committee.
• Legislation on waste management was submitted to the Energy and Environment Committee, with participation of members of the constitutional affairs, planning and industry committees.

Cairo Airport seeking EGP 1.2 bn loan to refurbish Terminal 1: The Cairo Airport Company has approached the National Bank of Egypt and Banque Misr for a EGP 1.2 bn loan to part-finance its plan to refurbish Cairo International Airport’s Terminal 1. Sources familiar with the agreement told Al Mal that the company is waiting to receive approval from the banks, and learn which one would be interested in managing the loan, which comes with a 5-7 year repayment term.

What’s happening at the airport? The company’s former chairman, Ahmed Fawzy, said in November that refurbishing the terminal would cost in the region of USD 200 mn. The plan would see the airport’s first and second terminals merged into a single building containing separate local and international departure halls. Terminal 3 would be revamped as an arrival hall and merged with the airport’s mall. An unnamed French company has been selected by the government to develop the Terminal 1 building, while the Cairo Airport Company issued in March a EGP 1 bn tender for local companies to renovate Terminal 2.

DISPUTE WATCH- Gov’t signs settlement with TMG for 2016 dispute over Four Season San Stefano: Talaat Moustafa Group (TMG) and the governorate of Alexandria signed yesterday a settlement agreement over the group's Four Seasons-branded hotel in Alexandria’s San Stefano, according to a cabinet statement. Under the agreement, TMG will pay EGP 7 mn in unspecified fees to the governorate each year, with that amount increasing 12% per annum. The real estate group will also be required to invest EGP 5 mn in “development projects” under its corporate social responsibility umbrella each year.

What was the issue to begin with? Although the statement does not clarify which dispute the agreement is meant to settle, we believe it pertains to a dispute the governorate had with TMG over the lack of an occupants’ union for the hotel and residence complex, claiming that it qualified as a residential building and not a hotel. Under Egypt’s 2008 Building Code, “a building, a development or a gated compound … which consist of 5 units or more are mandatorily required to establish a union for the occupants.” However, the 1973 Hotel and Touristic Facilities Act exempts hotels from the occupant union requirement. In 2018, the Council of State (Maglis El Dawla) ruled that the Four Seasons is a hotel, meaning it is not required to form an occupant union.

EARNINGS WATCH- Rameda profits soar in 1Q: Rameda Pharma almost trebled its profits in 1Q2020, recording net income of EGP 23.9 mn compared to EGP 8.1 mn a year earlier, according to the company’s earnings statement (pdf). Revenues climbed 22% to reach EGP 232.4 mn over the three-month period, up from EGP 189.9 mn last year.

Supply chain issues courtesy of covid-19 failed to dent the company’s recovery from last year’s production disruptions: “Despite the stresses placed on the Egyptian market in specific and global markets in general during the period by the coronavirus pandemic and its associated economic impacts, recovering volumes after last year’s production disruptions combined with improvements in our average price points delivered solid top-line growth for Rameda during 1Q20,” CFO Mahmoud Fayek said, noting that revenue growth was broad based with the exception of export sales, which, “fell on account of disruptions in global trade and logistical restrictions.” .

“Moving forward we will continue to seek opportunistic acquisitions that can drive growth, improve our profitability, and expand our market share,” CEO Amr Morsy said, adding that the company will continue to keep an eye out for potential acquisitions.

The detention and later release of Mada Masr Editor-in-chief Lina Attalah dominates the conversation on Egypt in the foreign press this morning. Attalah was detained for several hours yesterday after interviewing the mother of jailed activist Alaa Abd El Fattah, Laila Soueif, outside Torah Prison. Attalah was held at a police station in Maadi, but was released on EGP 2k bail yesterday evening. The story is getting wide attention: AFP | AP | Washington Post | France24 | The Independent | the Guardian | Il Mattino | Committee to Protect Journalists.

Elsewhere in the foreign press: The Financial Times’ Heba Saleh looks at the slowdown businesses are facing as a result of lockdown measures the government has imposed over the past several weeks.