Home electricity prices are going up

We could know more as early as this afternoon about when the Madbouly government plans to reopen airspace to regular commercial flights. Cabinet’s covid-19 committee said last week that it would review today the schedule on which it would ease some lockdown measures including the flight ban, which is presently due to expire on Sunday, 14 June. Officials said yesterday that they were giving 20-50% discounts on landing, parking and ground services fees at Sharm El Sheikh, Hurghada and Matrouh airports to encourage charters when airspace reopens.

Inflation figures for the month of May are due out today and central bank watchers around the world will cast their eyes to the United States as the US Federal Reserve’s open market committee kicks off its two-day meeting. Jay Powell & Co will offer their first economic forecasts in six months when the meeting wraps tomorrow. The FT has a list of six things to watch as the Fed meets.

PSA #1- It’s going to be hot today. Look for the mercury to spike to 40°C in the capital city today, according to our favorite weather app, cooling to 21°C overnight.

PSA #2- What part of “stay home” don’t you get? Coronavirus patients are most infectious when they first feel unwell, WHO experts said yesterday.

Also on the horizon:

We’re inching closer to House approval of the next state budget: The House Planning and Budgeting Committee approved yesterday parliament’s allocations under the state budget for the upcoming fiscal year, Al Mal reports. The committee has been holding piecemeal reviews and votes on the overall budget before handing it over to the general assembly for a final vote, which is scheduled for later this month. Parliament is expected to approve the budget before the current fiscal year ends on 30 June, though it has occasionally done so after that deadline. If that happens, spending continues as if the previous year’s budget had rolled forward to the new fiscal year.

SMART POLICY- The budget has earmarked EGP 447.3 bn for 691 green energy, transportation and housing projects during the upcoming fiscal year, according to a Planning Ministry statement. Around half of this amount is earmarked for Metro line upgrades as well as a new high-speed electric rail line linking the new administrative capital to Ain Sokhna and Alamein. Other projects include sustainable housing in Upper Egypt and renewable energy plants.

State grain buyer GASC is looking to tap the global grain market for the fourth time during the current 2020-2021 domestic harvest season. GASC, the world’s largest grain buyer, is shoring up reserves after signals earlier during the covid-19 pandemic that sellers might ban exports. GASC purchased 120k tonnes of Ukrainian wheat last week as it looks to import a total of 800k tonnes to help shore up its strategic reserves.

We’re going to see a partial solar eclipse on Sunday 21 June, according to the National Research Institute of Astronomy and Geophysics, Ahram Online reports. The eclipse will be visible from 6:24am to 8:24am — just make sure to not look directly into the sun without a pair of sunglasses on.

Keep your eye on:

• The Central Bank of Egypt will meet to review interest rates on Thursday, 25 June.
• Founding members of the EastMed Gas Forum will meet this month to ink the Cairo-based energy organization’s charter.

** What about your first e-learning for you? The Madbouly government signaled this week that e-learning could be on the menu again this fall — by itself or as part of a hybrid approach. Tell us how e-learning is working out in your household in a poll for our weekly Blackboard focus on education. As is our custom, we’ll draw the names of three respondents who will receive an Enterprise mug and a bag of our favourite coffee from our friends at 30 North. Tap or click here to take the survey. It’s quick and painless, we promise.

COVID-19 IN EGYPT-

The Health Ministry confirmed 35 new deaths from covid-19 yesterday, bringing the country’s total death toll to 1,306. Egypt has now disclosed a total of 36,829 confirmed cases of covid-19, after the ministry reported 1,385 new infections yesterday. We now have a total of 11,071 confirmed cases that have since tested negative for the virus after being hospitalized or isolated, of whom 9,786 have fully recovered.

Companies in 10 industries most affected by the pandemic will be given leeway in remitting social insurance for their employees as long as they don’t resort to layoffs, according to a decision by Social Solidarity Minister Nivine Kabbag. Aviation, hospitality and tourism, healthcare, media, contractors, and manufacturing are among the eligible industries and will receive temporary proof of coverage if they pay 40% of the monthly dues or commit to installment plans.

Business at Uber’s Careem arm has started to rebound across the Mideast as lockdown restrictions ease. Business is still down 50-60% y-o-y but has improved on the 80% drop seen in March and April, CEO Mudassir Sheikha told Bloomberg TV on Tuesday. Ride-hailing sister companies Uber and Careem disclosed on Monday that they had indefinitely suspended recruiting new drivers amid the slump in activity.

The market for air conditioners has dropped 50% y-o-y as consumers reportedly fear that ACs could help spread the virus that causes covid-19, Deputy Head of the Air Conditioning and Refrigeration Division in the Chamber of Commerce Zizi El Malat told the local press.

Repatriation flights start on Saturday as EgyptAir and Air Cairo look to bring home 3k nationals stranded in Qatar. The two airlines are also running repatriation flights to London from Cairo on Saturday, 13 June and Friday, 19 June.

Another 19 hotels are cleared to reopen under rules issued by the Tourism Ministry, bringing the total to 174, according to a ministry statement.

ON THE GLOBAL FRONT-

Fauci is “almost certain” a vaccine will be found, but warned that the outbreak is “far from over” globally even as countries everywhere begin to reopen their economies, the New York Times and Financial Times report. The disease is still “taking off” in emerging markets, FT columnist Martin Wolff adds,

From the good news / bad news department: Shoppers in the US are surprising retailers by flocking to brick-and-mortar stores, the WSJ writes. Fourteen US states reported a record rise in infection rates since the start of June as previously hard-hit areas such as New York and Illinois continue to reopen, the Washington Post reports.

Expats are starting to leave Dubai, Bloomberg notes in a gloomy piece that suggests the emirate could lose 900k jobs and see as much as 10% of its population leave.

Gulf mall owners are putting expansion plans on hold as the retail sector continues to struggle under coronavirus lockdowns and a dearth of tourists, Reuters reports. Openings in Dubai and Oman have reportedly been delayed. EFG Hermes has forecast in-store sales in Dubai to fall by a fifth if tourists are allowed into the country in 3Q — and 40% if travel restrictions remain until the end of the year — while MAF is expecting the retail slump to extend for another 18-24 months.

Satellite images and online searches suggest China had coronavirus last fall, according to a Harvard study that’s making headlines in the global press. Satellite images show a “dramatic” increase in vehicle traffic outside Wuhan hospitals as early as last summer, with some parking lots being 90% more crowded than usual, according to the study (pdf). Search engine Baidu saw a rise in searches about the terms “cough” and “diarrhea” at the same time.

China angrily dismissed the study: “To derive these conclusions from phenomena such as road vehicle traffic is … extremely preposterous,” the Financial Times reported a spokesperson for the foreign ministry as saying.

The cost of covid to airlines: USD 84 bn. Global airlines will see their revenue slashed in half to USD 419 bn and profits tumble by USD 84 bn this year in what will be the sector’s worst year in recorded history, the International Air Transport Association said yesterday. The news came as Emirates said it’s going to start cutting thousands of jobs.

AND THE REST OF THE WORLD-

SIGNS OF THE TIMES- Only 25% of Americans think that capitalism is good for society and Goldman Sachs thinks we could already be in the early days of a 20% oil price correction.

Palestinians are prepared to declare an independent state in response to Israeli plans to annex the West Bank, Palestinian Authority Prime Minister Mohammed Shtayyeh warned yesterday according to Reuters. The move comes as Israeli Prime Minister Benjamin Netanyahu plans to declare sovereignty over illegal Jewish settlements in the West Bank.

EY is facing a perfect storm as four simultaneous scandals threaten its influence over UK policymakers at a time when proposals to break-up the Big Four accounting firms are gaining traction among legislators, the Financial Times reports. In just the past few months, the firm was found to have covered up organized crime connected with a Dubai gold company, is facing questions over its role in the accounting scandal at Dubai-headquartered NMC Health, and the implosion of NYSE-listed Chinese coffee chain Luckin Coffee, and on Tuesday was sued by investors for alleged market manipulation by German fintech firm Wirecard.

The GCC is pushing hard on fintech: New York-based online Islamic investment platform Wahed Invest will make Riyadh its regional hub as it looks to expand into MENA after securing funding from Saudi Aramco, Dubai’s BECO Capital and Boston’s Cue Ball Capital, according to Bloomberg, which also notes that DIFC just invested in four fintech startups.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education.

In today’s issue: We explore Egypt’s electric vehicles market and infrastructure before and after covid-19.

Electricity Ministry spokesman Ayman Hamza blanketed the airwaves yesterday to explain the increase in electricity prices that come into effect as of 1 July. We have the full breakdown in this morning’s Speed Round, below.

The gradual lifting of subsidies allows the ministry to reroute these resources to improve infrastructure, including repairing and expanding the national grid, Hamza told Yahduth fi Misr’s Sherif Amer. Hamza also noted that the majority of citizens fall under the two lowest consumption tiers, which are still largely subsidized (watch, runtime: 3:33). The spokesman also phoned in to Al Tase’a Masa’an (watch, runtime: 23:48) and ‘Ala Mas’ouleety (watch, runtime: 44:36) for similar conversations.

Yesterday’s tripartite GERD meeting also earned some attention from Amer (watch, runtime: 3:14) and Masaa DMC’s Ramy Radwan (watch, runtime: 2:23). The story is also in this morning’s Speed Round.

Elsewhere, the World Health Organization’s (frankly confusing) statements yesterday on the risk of asymptomatic transmission of coronavirus had Radwan scratching his head. Maria Van Kerkhove, WHO’s Emerging and Zoonotic Diseases Unit director, said yesterday that asymptomatic transmission is “very rare,” but later walked back on the claim (watch, runtime: 3:14).

Your electricity bill will rise by as much as a third in July — but subsidies won’t be fully lifted for another five years: Average rates for electricity sold to residential consumers will increase between 16-30% from 1 July as the government has fully lifted subsidies on the uppermost consumption bracket. Many businesses, however, won’t be paying more as the tariff charged to retail and other commercial consumers will be left unchanged.

Factories will also be getting a EGP 0.10/KWh reduction in their August bills. Factories have been struggling to keep up with rising costs, and have been calling for price cuts. Meanwhile, farmers using electricity for irrigation will pay EGP 0.85/KWh, up from EGP 0.75/KWh in fiscal year 2019-2020.

Natural gas prices for electricity plants, meanwhile, remain unchanged. Prime Minister Moustafa Madbouly had decided in March to set the price of natgas for electricity plants at USD 3.25 / MMBtu, but plants currently pay USD 3 / MMBtu and state coffers cover the remaining USD 0.25.

Subsidies are also with us until 2025: A plan that would have seen subsidies entirely wiped out by July 2022 is being stretched out: Subsidies will now taper off through July 2025 to help consumers better cope with the impact of the covid-19 pandemic. When the government had first mapped out its planned elimination of electricity subsidies in 2014, the plan had been to lift subsidies entirely in 2019, but extended the timeline under orders from President Abdel Fattah El Sisi. Electricity prices increased by at least 15% in July 2019 and by an average of 26% in 2018.

Extending the phase-out will cost state coffers EGP 78.6 bn over the next five years, with households in lower consumption tiers benefiting to the tune of EGP 26.7 bn, manufacturers getting benefits of EGP 22 bn, and natural gas fired power plants receiving subsidies worth EGP 29.9 bn.

Top-down approach to lifting subsidies: Subsidies in July will only be entirely lifted for households consuming more than 650 KWh a month. Households consuming 1,000 or more KWh/month, which are currently the only band not handed subsidies, will also be used starting July for cross subsidies that benefit those in lower consumption tiers.

Tap or click here (pdf) for a review of the administration’s plan to postpone phasing out electricity subsidies, and figures for the coming fiscal years.

The new pricing structure for household customers:

Consumption tiers (with state subsidies):

• The first 0-50 KWh/month used will be charged EGP 0.38/KWh, up 26%. Those consuming within this band can expect to pay up to 20/month;
• The next 51-100 KWh/month used will be charged EGP 0.48/KWh, up 20%. Those consuming within this band can expect to pay up to 45/month;
• The next 101-200 KWh/month used will be charged EGP 0.65/KWh, up 30%. Those consuming within this band can expect to pay up to 136/month;
• The next 201-350 KWh/month used will be charged EGP 0.96/KWh, up 17%. Those consuming within this band can expect to pay up to 285/month;
• The next 351-650 KWh/month used will be charged EGP 1.18/KWh, up 18%. Those consuming within this band can expect to pay up to EGP 643/month.

Consumption tiers (with no subsidies):

• Those consuming 651-700 KWh per month could pay up to EGP 851/month from a previous 618/month. A flat rate of EGP 1.18/KWh will be applied to this band.
• Those consuming 701-800 KWh per month could pay up to EGP 969/month from a previous 758/month. A flat rate of EGP 1.18/KWh will be applied to this band.
• Those consuming 801-900 KWh per month could pay up to EGP 1087/month from a previous 898/month. A flat rate of EGP 1.18/KWh will be applied to this band.
• Those consuming 901-1000 KWh per month could pay up to EGP 1205/month from a previous 1038/month. A flat rate of EGP 1.18/KWh will be applied to this band.
• Those consuming more that 1,000 KWh per month will continue to pay up to 1491/month, rate was unchanged EGP 1.45/KWh, but subsidies lifted on monthly bills.

The new pricing structure for commercial buyers:

• 0-100 KWh per month: unchanged at EGP 0.65/KWh;
• 101-250 KWh per month: prices will go up by 7% to EGP 1.23/KWh;
• 251-600 KWh per month: unchanged at EGP 1.40/KWh;
• 601-1000 KWh per month: unchanged at EGP 1.55/KWh;
• Average consumption higher than 1,000 KWh per month: unchanged at EGP 1.60/KWh;

The average breakdown of industrial prices (measured in KV) — before the EGP 0.10/KWh discount afforded specifically to manufacturing plants:

• 132-220 KV lines: prices will remain unchanged at EGP 1.09/KWh;
• 33-66 KV lines: prices will remain unchanged at EGP 1.17/KWh;
• 11-22 KV lines: prices will remain unchanged at EGP 1.23/KWh;
• 380 V lines: prices will go up to EGP 0.93/KWh from 0.83/KWh

M&A WATCH- Al Ahly Capital is in talks to acquire 100% of e-payments firms Momken and Sadad in transactions that could conclude soon, Al Mal reports, citing unnamed sources. No further details were disclosed on the talks, which come as Al Ahly, the National Bank of Egypt’s investment arm, pushes into fintech. Al Ahly had signaled its intention to enter the non-banking financial sector last month.

In other news from the firm, Al Ahly Capital’s Pharos Investment Banking acted as sole sell-side adviser to Modern Waterproofing (Bitumode), which was bought by Sika Egypt earlier this week in a transaction worth EGP 460 mn, the firm said in a statement (pdf) yesterday.

Sovereign fund is getting in on a railcar assembly plant in East Port Said with the SCZone: The Suez Canal Economic Zone (SCZone), the Sovereign Fund of Egypt (SFE), and the Transport Ministry are looking to set up a plant to assemble railway cars, SCZone head Yehia Zaki told Extra News yesterday (watch, runtime: 3:20). The facility, which is one of “two or three” projects the SCZone and SFE are working together on, will produce electric monorail, high speed rail, and metro cars.

Background: The SFE is looking to invest in strategic sectors including logistics, renewables and manufacturing through industry-specific sub-funds. Fintech and services that will promote financial inclusion, pharma manufacturing, healthcare services, logistics, food processing and agriculture have also been on the fund’s investment radar for the near future.

Egypt, Sudan and Ethiopia agreed yesterday to hold more talks on the Grand Ethiopian Renaissance Dam (GERD) over the next week, Sudan’s Irrigation Ministry said yesterday. The three countries will hold ambassador-level negotiations on a daily basis — except on Friday and Sunday — and assess their progress next Monday or Tuesday. A minister-level meeting yesterday focused on the procedures required to resume the talks and each country’s sticking points in the long-stalled accord over GERD.

President Abdel Fattah El Sisi separately discussed the GERD negotiations yesterday during a National Security Council meeting, an Ittihadiya statement said. The statement stressed Egypt’s commitment to reaching a “fair and balanced” agreement, but said that Ethiopia’s unilateral decision to fill the dam’s reservoir this summer has “cast a shadow” over the talks.

House approves EUR 122.7 mn in financing from EIB for transport, sanitation: The House of Representatives’ general assembly approved yesterday three financing agreements Egypt signed in February with the European Investment Bank to fund sanitation and transport infrastructure projects, according to an International Cooperation Ministry statement.

Parliament also rubber-stamped a USD 1.75 mn grant from the International Bank for Reconstruction and Development and the International Development Agency to develop the investment sector, including service upgrades for GAFI, Hapi Journal reports.

The Financial Regulatory Authority has launched an app, ‘Empowering Women,’ to help companies recruit qualified women to leadership and decision-making roles in EGX-listed companies and across the finance sector, a statement by the authority said on Tuesday. Applicants upload their CVs to the app and preference will be given to women who have served on corporate boards three or fewer times, the statement noted. Egyptian companies failed to make progress on gender parity last year, with female representation on boards of EGX-listed companies declining, and women filling only 10% of board positions among companies surveyed by the Women on Boards Observatory group.

EARNINGS WATCH- Ibnsina Pharma has reported a 19.8% increase in 1Q2020 net profits to EGP 50.3 mn, from EGP 42 mn in the same period last year, it said in its earnings report (pdf). Revenues for the quarter jumped 19.2% to EGP 4.4 bn from EGP 3.7 bn in 1Q2019. Demand has been “resilient” in the face of covid-19 given the “strongly defensive nature of Egypt’s pharma market,” CEO Omar Abdel Gawwad said. The company has withdrawn its earnings guidance due to uncertainty here and abroad but expects the market to recover during the second half of the year, Abdel Gawwad said.

Emaar Misr profits down 42% in 1Q2020: Emaar Misr profits fell by 42% in the first quarter of 2020, extending a losing streak that saw profits fall 50% last year, according to a disclosure to the EGX yesterday. The company reported net income of EGP 215.8 mn during the first three months of the year, down from EGP 418.6 mn in 1Q2019.

Our next guest on Making It leads one of the biggest tech multinationals in Egypt and has twice been recognized by Forbes as one of the top businesswomen in the Middle East. During her tenure, the company reported its best performance since launching local operations. She was responsible for expanding the company’s role in government projects as well as growing the SME customer base.

Until then, you can catch our previous episode with Algebra Ventures Managing Partners Tarek Assaad and Karim Hussein on: Our website | Apple Podcast | Google Podcast | Omny. We’re also available on Spotify, but only for non-MENA accounts. Subscribe to Making It on your podcatcher of choice here.

Covid-19 underlines the home truth that you can’t just lump EMs together in a homogeneous asset class — and the extent to which investment risks and rewards in individual EM economies vary. Recovery in different emerging market economies is being determined by (the vastly different) approaches taken to tackling the pandemic, putting individual countries on different economic trajectories that makes them less homogeneous, Robeco’s global head of fundamental equities Fabiana Fedeli writes in the Financial Times. And with the variation in recovery paths come disparities in the impact of three core EM economic vulnerabilities, Fedeli says. For example, South Africa — whose gross external debt to FX reserves ratio is at 300% — is significantly more exposed to credit default risks than Taiwan, where the ratio is just over 40%.

For long-term rewards, investors should decouple EMs from each other and assess them as individual countries — not as a collective asset class. The potential impact on investment returns will be felt even by the North Asian countries that are closer to economic recovery, especially China. Governments currently pouring money into economic stimulus packages could up the regulation around returns in a bid to increase their inflows. Global supply chains are likely to face continued disruption, as localization increases and companies seek less reliance on a single overseas supplier. And consumption habits will remain low, impacting domestic demand for leisure and travel especially, until a covid-19 vaccine is widely available. This means it’s essential that risks and possibilities for outsized returns are assessed on a country-by-country basis.

Egypt has nominated Egyptian-Swiss lawyer Abdel Hamid Mamdouh as the next director-general of the World Trade Organization (WTO), according to Al Shorouk. Mamdouh was formerly a trade negotiator for Egypt and ex-WTO official, and is currently advising the G20 presidency holder Saudi Arabia on trade and investment policy. Nominations for the position are now open after former WTO head Roberto Azevedo resigned suddenly last month a year before his contract ended.

It is a very quiet morning for Egypt in the international press, setting aside one entirely odd story in the Guardian headlined It was hell: Spanish cocaine raid adds to shipboard misery for 4,000 cows.

Only five Egyptian firms made it into Forbes’ 2020 top 100 Middle East companies in a list dominated by Emirati, Saudi and Qatari firms. CIB was the highest-ranking Egyptian company coming in at #28. Towards the bottom of the list were Eastern Company (#79), Talaat Moustafa Group (#85), Elsewedy Electric (#87) and Telecom Egypt (#91).

Will covid-19 change city life as we know it? In a word, yes — city life will change, but perhaps not as much as we expect, suggests a Foreign Policy piece. Continued social distancing and fears around hygiene may cause people to eschew dense environments, including city apartments and crowded public transport, in favor of suburban houses, says professor Richard Florida. Pandemic-driven fear of human interactions could endanger tens of mns of service jobs, predicts professor Edward Glaeser. And urban specialist Robert Muggah envisions short-term changes to urban planning, ranging from mass test and tracing to retrofitting public spaces for social distancing, along with an acceleration of long-term trends such as increased digitalization, a shift to remote working, and the growth of driverless cars.

Many also emphasize the resilience of cities: Urbanization has always been a greater force than infectious disease and cities often bounce back stronger after a widespread illness, Florida says. And while many of our favorite shops and restaurants may be forced to close, the human need to mingle in “fearless proximity” to one another will not, says planning professor Thomas J. Campanella. Investing heavily in healthcare infrastructure and improving disease preparedness and response will be crucial to prevent catastrophic labor market losses, even if cities do end up becoming less dense as more people relocate to the countryside, says professor Rebecca Katz. And businesses and entrepreneurs facing financial hardship will need an unprecedented level of support, opening up a space for potential regenerators to exist alongside business incubators and accelerators, says Bruce Katz, founder of an urban innovation social enterprise.