Wednesday, 29 July 2020

Plenty of food investment ahead of Eid. See you next Tuesday, friends.

TL;DR

What We’re Tracking Today

Good morning, friends, and Happy Eid to you all. Today is the last workday of the week as banks (pdf), the EGX and the private sector are off starting from tomorrow (the wa’fa) until Monday, 3 August, in observance of Eid Al Adha.

We’re going to be off, too and will be back in your inbox at the appointed hour on Tuesday, 4 August.

COVID-19 IN EGYPT-

The Health Ministry yesterday confirmed 465 new cases of covid-19, up slightly from 420 on Sunday. This brings the nation’s total confirmed cases to 92,947. The ministry also reported 39 new deaths yesterday, increasing the overall death toll to 4,691. We now have a total of 35,959 cases who have fully recovered.

Pharma player EIPICO has begun manufacturing covid-19 treatment Epifluver-Favipiravir 200 mg after receiving the green light from the Egyptian Drug Authority, according to a bourse disclosure (pdf).

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ON THE GLOBAL FRONT-

Google’s 200k employees will be working from home for at least the next 12 months, the company announced, according to the Wall Street Journal.

Covid-19 is not seasonal and we’re in the midst of what will be one “big wave”: World Health Organization Spokeswoman Margaret Harris poured cold water on the idea that the pandemic could slow down in warmer climates and during the summer season, saying that it is currently not behaving like an influenza, according to Reuters. Instead, she said, we should think of the pandemic as one big wave that needs to be flattened.

Global air travel may not recover to pre-pandemic levels before 2024, the International Air Transport Association’s chief economist Brian Pearce said in a briefing to journalists, the Associated Press reports. The global body previously predicted a full recovery by 2023 but has pushed its estimate back a year as the virus continues to spread in the US and the developing world.

GLOBAL MACRO-

Fed extends emergency lending programs until the end of the year: The US Federal Reserve has agreed to extend the multitude of lending facilities introduced in March to stabilize the financial markets by three months until the end of the year, the Financial Times reports. The extension of the programs, which inject liquidity into the short-term funding and corporate bond markets, were agreed by the board on the opening day of the bank’s two-meeting to review monetary policy.

Stimulus putting USD reserve status in jeopardy, Goldman warns: The greenback’s dominant position as the world’s reserve currency may be under threat if the wave of fiscal and monetary stimulus launched this year triggers inflation, Goldman Sachs analysts warned yesterday. The escalating flight into gold is indicative of a market increasingly concerned about hedging against a debasement of the currency and record-low interest rates caused by the stimulus. So much so that there are now “real concerns around the longevity of the USD as a reserve currency,” they wrote.

OPEC is waking up to the prospect of a post-oil future: There are fears among OPEC members that the slump in global demand for oil triggered by the pandemic may be the tipping point for ushering in a future less reliant on hydrocarbons and more thirsty for renewable sources of energy, Reuters reports, citing industry insiders. Daily crude consumption fell by as much as a third earlier this year, and as momentum builds behind green energy and electric vehicles, oil producers are concerned that demand may never recover to pre-covid levels.

AND THE REST OF THE WORLD-

The IMF could offer Lebanon a bailout of USD 5-9 bn — as little as half of the USD 10 bn it originally sought to recover from its severe financial crisis — as negotiations between the two continue, Economy Minister Raoul Nehme told Bloomberg Television. He gave no time frame for when a possible agreement could be reached. Lebanon needs a total of USD 30 bn for recovery, and if an agreement with the IMF can be reached, will look to allies and leverage international donor pledges of some USD 11 bn in 2018 in exchange for promised reforms, but the IMF agreement is a crucial first step, Nehme said.

Former Malaysian PM handed 12-year jail term in 1MDB scandal: Malaysia’s former prime minister Najib Razak has been sentenced to 12 years in jail and fined almost USD 50 mn after a Malaysian court found him guilty of all seven charges for his role in the 1MDB scandal. Razak was charged with money laundering, abuse of power and criminal breach of trust, after he allegedly plundered bns of USD from state investment fund 1MDB to buy property, artworks and finance The Wolf of Wall Street. The Guardian and the Wall Street Journal both have the story.

And Goldman gets a comparative slap on the wrist: Goldman Sachs, which allegedly facilitated Razak’s looting of the fund, agreed to pay a USD 2.5 bn fine (a third of what the finance minister had demanded) in return for the government dropping criminal charges against the bank and halting legal proceedings against 17 executives.

The president of the African Development Bank has been cleared of misconduct following an independent inquiry, paving the way for him to run unopposed for another five-year term next month, the Financial Times reports. Whistleblowers had claimed that Akinwumi Adesina was favoring his Nigerian countrymen in the development bank’s hiring process, as well as approving hefty severance packages.

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*** 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 as well as social infrastructure such as health and education.

In today’s issue: Our three-part series on the feasibility of the government’s plan to convert us into a nation of drivers powered by natgas continues. Today, we look at the financing and infrastructure challenges

Enterprise+: Last Night’s Talk Shows

The two most popular topics of the year — the coronavirus and the GERD — captured the attention of the nation’s talking heads again last night.

Covid is back on the airwaves: Presidential health advisor Mohamed Awad Tag El Din urged people to maintain social distancing and keep using masks to prevent a resurgence in the virus during an interview with Yahduth Fi Misr’s Sherif Amer. Although recent positive figures suggest the outbreak might be on the wane, respiratory viruses will gather steam from October and risks remain about the prospects of a second wave, he said (watch, runtime: 3:17), (watch, runtime: 3:35) and (watch, runtime: 3:33).

Saving water: President Abdel Fattah El Sisi has directed the government to employ advanced irrigation methods to a mn acres to help the country use its water resources more efficiently, Agriculture Minister Elsayed El Quseir told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 18: 44).

GERD talks: The next round of negotiations over the filling and operation of the Grand Ethiopian Renaissance Dam (GERD) will run for the next two weeks, Foreign Ministry spokesperson Ahmed Hafez told Yahduth Fi Misr’s Sherif Amer. Hafez said that Foreign Minister Sameh Shoukry is holding talks with his counterparts in many countries, and that they are in contact with US lawmakers about the situation. He reiterated Egypt’s determination to reach a fair agreement that includes the rights of the three countries to the Nile’s water and that

Egypt is willing to continue negotiations until an agreement is reached (watch, runtime: 6:03).

Speed Round

INVESTMENT WATCH- The way to a foreign investor’s pocket book is through their stomach. Ours is a consumer-led economy, and Egyptian consumers love food above all else. Fitting, then, that we head off on our Eid holiday with news of new FDI in food and food-centered retail:

India’s LuLu Group is planning to invest USD 1 bn in Egypt over the next three years to build out its branch network, Internal Trade Development Authority (ITDA) head Ibrahim Ashmawy said, according to Al Mal. The Abu Dhabi-based, Indian-owned hypermarket operator inaugurated its second branch in Egypt — which cost EGP 180 mn — earlier this week. LuLu had said last year it plans to open two branches in Egypt in 1H2020, including one in Wadi Degla and another in the Fifth Settlement. The company said in summer 2019 that it would invest USD 500 mn in its expansion in Egypt.

Kraft Heinz will invest over EGP 920 mn in Egypt over the next five years to add 14 new production lines, Managing Director Hany Elmessiry said, according to the local press. The company plans to increase its output to cover domestic consumption and sell to export markets. The company exports nearly EGP 680 mn-worth of goods, or 20% of its annual output, to countries in the Gulf and Africa.

Hero Foods is planning to invest USD 5 mn by the end of 2020 to expand its jam factory in Qalyubia, Middle East and Africa (MEA) operations head Mahmoud Bazan tells the local press. The Swiss food manufacturer will use the investments to add capacity to what is already one of the largest jam factories in the MEA region. The company has spent over USD 70 mn in expansions and upgrades since it acquired the factory in the early 2000s.

INVESTMENT WATCH- The next step in our journey to an EV future will cost about EGP 500 mn: The plant that will eventually assemble 25k electric vehicles a year in partnership with China’s Dongfeng Motor Corporation will cost EGP 500 mn to get off the ground, Public Enterprises Minister Hisham Tawfik was quoted as saying by Al Mal. Under the MoU signed late last month between the Chinese firm and the Metallurgical Industries Holding Company, production is slated to begin in the last quarter of 2021 at facilities owned by El Nasr Automotive.

We’ll know more soon about the government’s plan to roll out EVs around the country: Tawfik recently handed documents to the presidency outlining a national incentives strategy for the production and ownership of EVs, he said, adding that the cabinet will issue a statement soon with more details. Incentives involve a set price for charging the vehicles, agreements with private mall operators to set up charging docks, and subsidies of around EGP 50k per vehicle. Tawfik first announced the subsidies, along with a three-year plan to build 1k fast charging stations, earlier this year. Alongside those measures, public authorities, economic bodies, and public sector companies will be required to replace 5% of their fleet every year with electric cars, Tawfik also said recently.

Background: We noted last year that the government is working on a new policy framework to encourage the use of EVs under instructions from President Abdel Fattah El Sisi. We also looked into whether Egypt is actually ready to embrace a market for EVs in a recent edition of Hardhat, our weekly infrastructure vertical.

Also in the pipeline — funding for electric taxis: The Public Enterprises Ministry is planning to roll out a program to provide financing for electric taxi purchases, Tawfik said. Details on the program are also due out soon, he added, hinting that there could similarly be a separate financing program for purchases of personal EVs.

In related news, Tawfik held talks yesterday with the Chinese ambassador in Cairo Liao Liqiang on collaboration in EV manufacturing. The two agreed to compile a shortlist of potential Chinese partners to work with the government on its EV development plan, according to Masrawy. They also discussed the MoU with Dongfeng, plans to concentrate Egypt’s EV efforts in facilities owned by El Nasr, as well as have the state-owned company act as an agent for Chinese EV makers, and cooperation in manufacturing key EV components through “multiple forms of partnership” with a Chinese company leading in the field. There was no mention of the latter company’s name nor specifics on the potential partnership.

Strong growth in automotive sales in 1H2020 despite pandemic: Automotive sales climbed 22% in the first six months of the year, despite the coronavirus pandemic weighing on the sector for much of the second quarter, industry data show. Figures released by the Automotive Marketing Information Council (AMIC) show that dealers sold 90.4k vehicles (including passenger cars and commercial vehicles) in 1H2020, up from 74.8k during the same period in 2019. The six-month figures are supported by a strong 1Q performance that saw sales grow 50% on an annualized basis, before the government’s partial lockdown of the economy between April and June which curbed imports and temporarily shuttered dealerships.

Crunching the numbers: Distributors sold almost 11k more passenger cars during the first six months of the year than they did in the equivalent period last year, with sales figures rising 22% to 62.2k vehicles. Bus sales surged 80% to 12.7k, while truck sales fell slightly to 15.6k vehicles. The report, which relies on self-reporting by member distributors, shows Chevrolet as the top-selling brand, capturing a market share of 20.4%. Toyota came second with a 12.3% market share, followed by Nissan at 8.9%.

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Gov’t considers flight discounts to support tourism sector: The government is considering including domestic tourism in its recently launched consumer spending initiative by offering discounts on domestic flights and other means of transportation to support the country’s ailing tourism sector, Al Mal reports, citing unnamed sources. The report comes just days after the government pushed ahead with a new program that aims to catalyze bns in consumer spending to drive economic growth in this time of corona.

Background: The government launched its “Not Too Expensive for You (Ma Yeghlash Aleik)” program at the beginning of this week to stimulate some EGP 125 bn-worth of consumer spending. Citizens can obtain discounts of 15-25% on a range of goods including electronics, appliances, clothes and furniture, while ration cards will be topped up by EGP 200 per person up to a maximum of EGP 1k per family. The program is nominally supposed to run for the next three months but sources said this week that the discounts will remain in place until at least January 2021.

Shareholders look to sell 7% stake in Fawry: A group of shareholders are looking to sell a combined stake of c. 7% (50 mn shares) in EGX-listed e-payment company Fawry, a source with knowledge of the transaction told Enterprise. Selling shareholders include the Egyptian American Enterprise Fund (EAEF), the International Finance Corporation (IFC), a vehicle of private equity investor Helios, asset manager ResponsAbility, the National Bank of Egypt, Banque Misr, and a number of Fawry employees. The EAEF, IFC, and Helios vehicle Link were among 40 shareholders who earlier this year were transferred the ownership of a 63.99% stake in Fawry previously held by PSI Netherlands Holding. Fawry is Egypt’s largest financial payments business. EFG Hermes is managing the offering.

HHD extends contract to co-develop New Heliopolis land with Sodic: State-owned Heliopolis Housing and Development’s (HHD) board of directors agreed yesterday to extend the deadline by 11 months to develop a a 655-feddan plot in New Heliopolis under a 2016 agreement with upmarket real estate developer Sodic, according to a bourse disclosure (pdf). The new deadline is unclear. HHD also signed off on restructuring the EGP 5.01 bn minimum guaranteed revenues from the development, citing the current economic slowdown and its effect on the real estate market.

Background: Sodic and HHD had signed an agreement (pdf) back in 2016 to co-develop the land into a “fully integrated project” with retail, medical, educational, and sports facilities, in addition to 8,600 homes. Under the agreement, Sodic is entitled to 70% of the revenues from homes sold in the development, while the state-owned company will get the remaining 30%. Revenues from commercial and retail sales are split similarly.

DISPUTE WATCH- SMW Gold pledges to develop Al Fawakhir gold mine following withdrawal of arbitration case: Russian miner SMW Gold has reached an agreement with the government to renegotiate a gold exploration contract at the Al Fawakhir concession in the Eastern Desert, Al Mal says, citing an unnamed official. SMW has been the subject of a drawn-out arbitration dispute with the Egyptian government, filed in 2013 after the Egyptian Mineral Resources Authority (EMRA) accused it of failing to invest the agreed amount in the Al Fawakhir and Om Balad concessions, awarded back in 2006.

SMW recently withdrew the case after being acquired by Africa-focused Australian miner Allied Gold, according to a letter by the Cairo Regional Centre for International Commercial Arbitration (CRCICA) that the newspaper says it has seen. Following the acquisition, SMW handed over a USD 5 mn letter of guarantee to the government to return to Al Fawakhir and USD 8.5 mn to launch the exploration program, according to the official.

Al Fawakhir isn’t a name any of us heard of in a while: Al Fawakhir is an ancient gold mine located in the Eastern Desert and for which the Pharaohs drew up the first geological map in Egypt’s history. It was developed by the British in 1948, but then closed by Gamal Abdel Nasser following the 1952 Revolution.

Eni, BP, Total confirm gas discovery in North El Hammad concession: Eni, BP (pdf) and Total confirmed yesterday a gas discovery at the Bashrush well in the North El Hammad concession. Production tests yielded flow rates of up to 32 mn scf/d, which are expected to increase to 100 mn scf/d per well in the future along with a 800 barrels of condensate per day, the company said. Eni first announced the discovery earlier this month prior to testing the well for production. An official at the Egyptian state gas company EGAS claimed that reserves at the well could be as much as 250 bn cubic feet. Neither Total, Eni or BP have provided reserve estimates. Operator Eni and BP both hold 37.5% stakes in the concession while Total has a 25% stake.

El Sisi says Egypt will pursue GERD negotiations, denounces calls for military action: Egypt is still committed to breaking the deadlock on the Grand Ethiopian Renaissance Dam (GERD) through negotiations, President Abdel Fattah El Sisi said yesterday, according to MENA. Speaking during the inauguration of the Roubiki industrial zone, the president denounced calls in “the media” to resort to military action over the dam, saying that ongoing talks are aimed at reaching an agreement that doesn’t threaten Egypt’s water security. El Sisi made similar remarks last week in his speech commemorating the 23 July Revolution. Bloomberg also had the story.

Egypt is also investing around EGP 1 tn to cut down on water waste and improve the utilization of our resources, El Sisi said.

Kamel heads to Sudan: Egypt’s Intelligence chief Abbas Kamel was in Khartoum yesterday for talks with Sudan’s prime minister Abdalla Hamdok, Sudan’s state news agency SUNA reported. The report offered little details about the substance of the meeting, saying only that it came “within the framework of bilateral relations.” This came as the Sudanese cabinet held a meeting to discuss the potential effects of Ethiopia unilaterally filling the dam’s reservoir on the country’s water supply.

And Shoukry has been reaching out to US lawmakers: A Foreign Ministry statement said yesterday that Minister Sameh Shoukry had held talks with a number of senior lawmakers about the status of negotiations with Ethiopia as well as the situation in Libya.

Also from the president’s remarks yesterday :

  • The president urged citizens against getting lax with social distancing and precautionary measures as covid-19 case and death counts drop, saying that the government could decide to re-impose the lockdown if numbers start to rise significantly again.
  • Egypt wants to push its exports of locally manufactured goods to “at least” USD 100 bn within the next few years and will upgrade all spinning and weaving factories in El Mahalla within two years.

EARNINGS WATCH- Talaat Moustafa Group (TMG) reported a drop in net income to EGP 705 mn in 1H2020, compared to EGP 812 mn in the first half of last year, the real estate developer said in a regulatory filing (pdf). Revenues during the period came in at EGP 4.6 bn, down 7% from last year.

Credit Agricole Egypt has reported a net profit of EGP 701 mn in 1H2020, down 46% from EGP 1.3 bn in the same period last year, according to its earnings statement (pdf).

*** WE’RE HIRING: We’re looking for smart and talented people to join our team at Enterprise, which produces the newsletter you’re reading right now and Making It, our very first podcast. We offer the chance to work in a unique and casual work environment that promises to be intellectually challenging and rewarding. Enterprise is currently in the market for:

A senior editorial leader, who will work on this product and help launch new products. You have at least five years of experience in journalism and a minimum of two of those should have been spent in an editor’s slot. Strong knowledge of Egypt, a demonstrated interest in business / finance, and a desire to lead a team are musts. Candidates must also be bilingual.

A seasoned reporter to join our team and create stories and packages that fascinate and inform our readers. Applicants should have serious English-language writing chops, a strong interest — and preferably some professional experience — in business / finance or business journalism, and solid analytical skills. You’ll be expected to pitch stories and take assignments, develop leads into full-blown stories, and should be fluently bilingual.

Interested in applying? To apply for the editor / reporter positions, please submit your CV along with 2-3 writing samples and a solid cover letter telling us a bit about who you are and why you’re a good fit for our team. The CV is nice, but we’re much more interested in your clips and cover letter. Please submit all applications to jobs@enterprisemea.com.

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The Macro Picture

Growing debt piles are becoming increasingly insurmountable for some developing economies as they struggle to find the resources to repay bns of USD borrowed from private investors over the past decade, the Wall Street Journal says. The pandemic has made matters worse, but these countries were already ill-prepared to both service their debts and invest enough into their economies and infrastructure — which is what a chunk of the borrowing was meant to finance.

Debt levels have been soaring over the past decade in sub-Saharan Africa’s poorest countries. By 3Q2019, their debt-to-GDP ratio had swelled to 60% from 38% one decade earlier, the WSJ says, citing figures from the Institute of International Finance. The WSJ looks closely at Zambia, which is seriously strained as it rapidly approaches its 2022 due date to repay FX-denominated bonds it took to market in 2012 when its economy was on the up — largely thanks to its copper resources and China’s massive demand for the commodity. The Southern African country was meant to invest in vital infrastructure, including healthcare, but its borrowing quickly proved unsustainable when China’s economic slowdown drove down copper prices and the Zambian currency tumbled, more than tripling the country’s debt in local currency terms.

It’s not just Africa — Latin America also has a ticking debt bomb in its lap: Debt levels are skyrocketing in Latin American countries struggling to contain the fallout from the pandemic, including Argentina, Ecuador, Chile, Brazil, and Mexico, the Financial Times said. Similar to other emerging market blocs, the LatAm region was already grappling with debt defaults, slow growth, weak healthcare systems, low tax revenues, high levels of borrowing, and an over-reliance on commodity exports before the pandemic broke out.

While the WSJ doesn’t explicitly mention us, Egypt has recently been named among the emerging market economies that are “most vulnerable” to defaulting on sovereign external debt in the next year, along with Zambia, Ghana, South Africa, India, Nigeria, and Brazil. According to Oxford Economics and IMF figures, Egypt has one of the highest ratios of maturing debt and fiscal deficit to GDP among 20 EM peers, standing at around 40%. And while Egypt is much better positioned for a recovery than other EMs, part of the risk we face is being seen as one and the same as our peers as investors look at the entire asset class as homogenous.

Egypt in the News

The jailing of five women for posting “indecent” videos on TikTok still leads the conversation on Egypt in the international press this morning: Associated Press | New York Times | International Business Times | Metro.

Editor released after two years in detention: The Associated Press picks up the news that editor of Masr Al Arabia Adel Sabri was released on Monday after spending two years in detention for republishing a controversial New York Times article.

Diplomacy + Foreign Trade

Egypt’s appetite for Brazillian poultry products shot up 27% in the first six months of the year as beef prices spiked on heightened Chinese demand, reports the Brazil Arab-News Agency (ANBA).

hardhat

How feasible is the plan to replace gasoline-fired cars with dual-fuel vehicles? The Sisi administration recently announced a plan to fast-track the replacement of traditional gasoline-fired car engines with dual-fuel engines that primarily use natural gas. Up first: Taxis, which the local press reported earlier this week will need to convert to a dual-fuel system as a condition of renewing their licenses. In part one of our three-part series on the plan, we looked at the origin of the initiative.

Today, we explore the challenges, particularly on the financing and infrastructure sides of the equation.

CHALLENGE #1- Money. Financing the conversion or replacement of old cars comes with a hefty price tag, starting with the cost of vehicles themselves and extending to where the cash will come from to build out a capable national filling network. Trade Minister Nevine Gamea has estimated that 1.8 mn cars will either be converted or replaced at a cost of EGP 320 bn. The first stage would see 147k cabs and microbuses converted to run on both gasoline (or diesel) and natgas, which would take up to three years at a cost of EGP 1.2 bn. She expects the next step would see the replacement of 240k microbuses that run on diesel — a process that would cost about EGP 53 bn. Next up: 50k cabs that are more than 20 years old that would need to be replaced at a cost of EGP 10 bn.

By far the biggest expenditure: The replacement of 1.3 mn passenger cars over 20 years old at an estimated cost of c. EGP 250 bn. Each of those cars will be taken off the road in favour of newer vehicles with dual-fuel engines.

Who’s going to pay for it? Everyone, from taxpayers to individual vehicle owners by way of (we expect) development finance institutions — and don’t be surprised to see a state-floated green bond or two thrown in for good measure.

Expect private car owners to pay out of pocket for converting their cars if conversion is made mandatory to license a new car or renew and the license of an existing vehicle, Khaled Saad, secretary-general of the Egyptian Association of Automobile Manufacturers, told Enterprise.

The Sisi administration will likely make funding available to banks to on-lend to vehicle owners who need help paying for it. The government is working on providing guarantees to banks to provide soft loans to customers who will convert their vehicles, Finance Minister Mohamed Maait told us. This guarantee, he adds, will be coming from a new Consumption Finance and Guarantee Fund. It will be about EGP 2 bn in size at the outset.

Gasoline prices will go up: The Oil Ministry could classify gasoline as a luxury good and price it accordingly, ministry sources tell us. It’s simple economics: Use state power to make the undesirable thing (gasoline) more expensive and watch consumer behaviour change. The administration effectively did the same thing with subsidy cuts that made electricity and petroleum products more expensive.

The state will also promote a trade-in initiative. The Trade and Industry Ministry is looking at a program that will give owners of cars that are older than 20 years an incentive to sell them to the government, according to Youm7. Sellers would then get a sum they can use as a down payment on a dual-fuel car — likely with a bank loan on the side.

CHALLENGE #2- Infrastructure. Car owners won’t convert if they have to wait in line for a day to top up their tanks, and it’s clear that the nation’s 190 natgas filling stations aren’t sufficient — we have nearly 2,900 traditional-fuel stations. Most of traditional stations are private-sector-owned, but some are owned and operated by state-owned companies.

Oil Minister Tarek El Molla said earlier this month that he has a plan to build out a national network of natgas stations, each with a capacity of 1.3k cars per day, but stopped short of specifying how much of the program will be left to the private sector. Former EGPC deputy chief Medhat Youssef tells us he expects the state to roll out 100 stations in the first wave. The plan to roll out new filling stations has apparently been in the pipeline for almost a year, with the central bank looking at how to provide low-cost funding for the program, according to Youm7.

Not every station will need to be newly built — existing filling stations could themselves add natgas handling alongside diesel and petrol, AUC petroleum engineering professor Gamal El Kaliouby told us.

CHALLENGE #3- How fast can we convert vehicles to run on natgas? Only 300k out of 11 mn licensed vehicles run on natural gas, according to a Reuters report last year. Some 6k cars were converted in each of 2015 and 2016 and maybe 50k last year — that’s probably enough to do all 147k cabs and microbuses in three years. But the system could be overwhelmed if passenger car owners are prompted to make the conversion ahead of schedule.

An old state-owned company may be revived to build up the infrastructure: To meet these infrastructure challenges, the government is considering reviving Safi Misr, a state company that will partner with Italy’s Landi Renzo, with the aim of accelerating the establishment of conversion and fuel stations, Oil Ministry sources tell us. The company would firstly import gas compressors to absorb the initial demand and eventually look to manufacture them here.

Expect there to be room for the private-sector, too. Youssef, the former EGPC official, says he believes the Oil Ministry will invite the business community — potentially including foreign investors from Korea, Italy, China and Italy — to enter the field. And the state itself could set up new conversion companies, AUC’s El Kaliouby said.

CHALLENGE #4- Convincing car owners to go to the expense and hassle of conversion, though the answer here may be as simple as saying, “It’s the law — do you want a new license or not?”

NEXT WEEK: We ask how the automotive industry is reacting to the plan — and wonder whether this might (sensibly, given our national natgas bounty?) push back by a decade or more the adoption of electric vehicles in Egypt.

Your top infrastructure stories of the week:

  • The Transport Ministry is studying the possibility of a second phase of the electric train project that will connect Al-Salam, Tenth of Ramadan, and the new administrative capital, according to Al Mal.
  • The Slum Development Fund is eyeing a EUR 24 mn grant from a German government donor to eliminate unsafe slums.
  • The National Railways Authority is set to sign a EUR 100 mn loan agreement to finance Siemens’ electric signaling systems project and to develop railway lines and crosses.
  • Cabinet signed off on a USD 500 mn World Bank facility to support low-income housing and the state’s Social Housing Mortgage Finance Fund.
  • India’s LuLu Group opened its second hypermarket branch in Cairo, in which it invested EGP 180 mn. The group plans to invest EGP 1 bn in Egypt’s retail industry, as we note in Speed Round, above.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.93 | Sell 16.03
EGP / USD at CIB: Buy 15.93 | Sell 16.03
EGP / USD at NBE: Buy 15.92 | Sell 16.02

EGX30 (Tuesday): 10,569 (-0.1%)
Turnover: EGP 1.1 bn (17% above the 90-day average)
EGX 30 year-to-date: -24.3%

THE MARKET ON TUESDAY: The EGX30 ended Tuesday’s session down 0.1%. CIB, the index’s heaviest constituent, ended down 0.4%. EGX30’s top performing constituents were GB Auto up 3.7%, Elsewedy Electric up 3.5%, and Ibnsina Pharma up 3.3%. Yesterday’s worst performing stocks were EFG Hermes down 3.9%, Kima down 2.6% and Dice down 1.2%. The market turnover was EGP 1.1 bn, and local investors were the sole net buyers.

Foreigners: Net short | EGP -59.2 mn
Regional: Net short | EGP -28.0 mn
Domestic: Net long | EGP +87.2 mn

Retail: 57.5% of total trades | 56.6% of buyers | 58.3% of sellers
Institutions: 42.5% of total trades | 43.4% of buyers | 41.7% of sellers

WTI: USD 41.05 (-1.32%)
Brent: USD 43.26 (-0.35%)

Natural Gas (Nymex, futures prices) USD 1.80 MMBtu, (+3.52%, August 2020 contract)
Gold: USD 1,971.40 / troy ounce (+0.82%)

TASI: 7,459 (+0.05%) (YTD: -11.09%)
ADX: 4,324 (-0.15%) (YTD: -14.80%)
DFM: 2,065 (+0.19%) (YTD: -25.30%)
KSE Premier Market: 5,488 (+2.55%)
QE: 9,371 (+0.22%) (YTD: -10.11%)
MSM: 3,558 (+0.04%) (YTD: -10.62%)
BB: 1,289 (+0.57%) (YTD: -19.94%)

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Calendar

28-29 July (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

30 July-3 August (Thursday-Monday): Eid El Adha, national holiday.

3 August (Monday): Churches in Cairo and Alexandria reopen.

3 August (Monday): The African Union will hold a meeting with Egypt, Ethiopia, and Sudan to discuss the Grand Ethiopian Renaissance Dam

5 August (Wednesday): IHS Markit PMI for Egypt released.

9-10 August (Sunday-Monday): Egyptian expats vote by post in Senate elections.

11-12 August (Tuesday-Wednesday): Senate elections take place.

13 August (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

13-15 August (Thursday-Saturday): RiseUp from Home digital event. Pre-registration available here.

16 August (Sunday): House of Representatives reconvenes after a brief recess.

20 August (Thursday): Islamic New Year (TBC), national holiday.

8-9 September (Tuesday-Wednesday): Run-off Senate elections.

12 September (Saturday): Court session for Egyptian Resorts Company lawsuit against The Tourism Development Authority

15 September (Tuesday): 2019-2020 academic year ends for Egyptian universities.

15-16 September (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

20 September (Sunday): A Cairo administrative court is due to issue a ruling in a third-party lawsuit demanding the government block YouTube in Egypt for carrying an allegedly sacreligious video. The case is an infamous 2012-vintage lawsuit still wending its way through the courts.

24 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

6 October (Tuesday): Armed Forces Day.

8 October (Thursday): National holiday in observance of Armed Forces Day.

16 September (Wednesday): The last day for the final results of the senate elections to be announced.

17 October (Saturday): 2020-2021 academic year begins for K-12 students at state schools and students in public universities

23-31 October (Friday-Saturday): El Gouna Film Festival, El Gouna, Egypt.

29 October (Thursday): Prophet Mohamed’s birthday (TBC), national holiday.

November: Egypt will host simultaneously the International Capital Market Association’s emerging market, and Africa and Middle East meetings.

4-5 November (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

12 November (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

15-16 December (Tuesday-Wednesday): US Federal Open Market Committee will hold its two-day policy meeting to review the interest rate.

24 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

25 December (Friday): Western Christmas.

1 January 2021 (Friday): New Year’s Day, national holiday.

7 January 2021 (Thursday): Coptic Christmas, national holiday.

25 January 2021 (Monday): 25 January revolution anniversary / Police Day.

28 January 2021 (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

4 February 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

18 March 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

12 April 2021 (Monday): First day of Ramadan (TBC).

25 April 2021 (Sunday): Sinai Liberation Day.

29 April 2021 (Thursday): National holiday in observance of Sinai Liberation Day.

29 April 2021 (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

3 May (Monday): Sham El Nessim.

6 May (Thursday): National holiday in observance of Sham El Nessim.

12-15 May (Wednesday-Saturday): Eid El Fitr (TBC).

10 June (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

22 July (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

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