Banque du Caire isn’t debuting on the EGX this year

It’s a relatively slow news day this morning as we slide into the weekend, suggesting that we’re in the thick of the regularly scheduled summer news slowdown.

Look for the news cycle to pick up again later today, when the Central Bank of Egypt’s Monetary Policy Committee meets to review interest rates. All signs point to a hold, with nine of the 10 analysts we polled this week expecting the central bank to leave rates unchanged.

RiseUp is holding a three-day digital conference starting today: RiseUp from Home will bring together regional entrepreneurs for its first event since the onset of the pandemic and feature talks from some regional entrepreneurs, investors and business experts.

COVID-19 IN EGYPT-

The Health Ministry confirmed 26 new deaths from covid-19 yesterday, bringing the country’s total death toll to 5,085. Egypt has now disclosed a total of 95,963 confirmed cases of covid-19, after the ministry reported 129 new infections yesterday. We now have a total of 55,901 confirmed cases that have fully recovered.

DONATIONS-

Germany’s diplomatic mission in Cairo is donating EUR 30k to Egypt’s Mersal Foundation to help provide hospitals across the country with medical equipment and PPE, according to a statement.

Egypt sends fourth aid shipment to Lebanon: An Egyptian plane loaded with 14 tonnes of flour arrived in Lebanon yesterday, as the country’s primary wheat silo was destroyed by the devastating blast which hit the Port of Beirut on 4 August, Egypt’s embassy in Lebanon said.

WHO calls for more donations: The World Health Organization is calling on foreign donors to raise USD 76 mn to offset damages to medical facilities and supplies, the agency’s regional programme director, Rana Hajjeh, said, according to Reuters. The organization is particularly concerned about the country’s ability to cope with covid-19, particularly as last week’s blast put three hospitals out of operation — critically reducing the number of hospital beds available to treat cases.

Pompeo is heading to Vienna to talk EastMed tensions with Greece’s Dendias: US Secretary of State Mike Pompeo will meet with his Greek counterpart Nikos Dendias in Vienna on Friday to discuss Turkish-Greek disputes over gas exploration and drilling in the eastern Mediterranean, Reuters reports. Egypt and Greece signed a joint economic zone agreement in the EastMed earlier this week, drawing ire from Turkey and leading to a series of escalations from Ankara and Athens. Turkey says it wants to engage in dialogue to resolve its dispute with Greece over the EastMed, but warned it was prepared to defend its “rights and interests,” the newswire said.

With oil prices still low, Saudi Aramco is slashing its planned capex spending by 50% next year to USD 25 bn, and might not ramp up this figure until 2023, Bloomberg reports, citing sources familiar with the matter. The oil giant is cutting spending at the same time it committed to pay out USD 75 bn in dividends this year despite sustaining a 73% plunge in its 2Q2020 earnings. “They view their ability to maintain the dividend as a competitive advantage over other oil companies, and they can cut back on capex without putting themselves in a precarious position to ramp up production when demand recovers, SMBC Nikko Securities America energy equity research David Havens says.

The “summer of discontent” that petrostates are grappling with may be the shape of things to come, even after OPEC salvaged oil from its historic drop to bring it up to the USD 40 / bbl mark, Bloomberg says. The oil cartel’s “shaky six” — Algeria, Iran, Iraq, Libya, Nigeria, Venezuela — all face restive political and economic climates that underscore the lack of a quick fix anytime soon, even if production rebounds. The pandemic’s toll on travel, international and local, is also likely to be long-lasting, hastening the conversation about peak demand and an inevitable shift to clean and renewable energy.

A rally in tech stocks helped the S&P 500 close trading yesterday just shy of its February peak, Reuters reports. The Nasdaq and Dow Jones also rallied yesterday, but the Dow Jones has yet to rebound to record levels reached in February. “Clearly the market has been outperforming the economy by a wide stretch recently,” said JP Morgan Asset Management Chief Global Strategist David Kelly. Democratic presidential nominee Joe Biden’s selection of California Senator Kamala Harris earlier this week has also given the market “a little bit of relief in that you now have basically two centrist candidates on the Democratic ticket,” Kelly said.

The UK economy is a basketcase right now: UK economic output collapsed by a stunning 20.4% in the second quarter, the deepest recession of any major European economy and the biggest contraction on record, official figures showed yesterday. Analysts speaking to the Financial Times attributed the cratering economy to the country’s long lockdown and its dependency on consumer-facing services, which account for 80% of output.

Time to be on the EUR? Speculation that the USD will fall and that the EUR will rise to record levels has reached a nine year high, thanks in large part to a USD 882 bn stimulus package passed by eurozone leaders, and better containment of the pandemic on the continent compared to the US, Axios says. Proceed with caution: The last time investors piled into the EUR in 2018, the market reversed and the USD soared.

A glimpse into Egypt’s WTO director-general candidate’s proposed policy plan: Egypt’s candidate for the top position at the World Trade Organization (WTO) wants to overhaul the organization’s political vision to better address the host of trade issues currently plaguing the world, according to the National. Speaking at a webinar yesterday, Abdel Hamid Mamdouh said that, if he is elected to the top job, his top priorities would be “to have a clear vision for a reform agenda and reform process … What do we want to do with this organization?” The career diplomat said the WTO is facing a “complete meltdown” in its systems as a result of unsustainable and “‘excessive pressure on its dispute settlement function,’” putting it under a stress test that necessitates serious reforms. Mamdouh is one of six candidates that have been shortlisted to become the new WTO director-general, with the winning nominee set to be named before Roberto Azevêdo steps down on 31 August.

How the pandemic has forced businesses to adapt their operations to become more resilient: The covid-19 pandemic uncovered significant weaknesses in global businesses’ key operational areas, leading many to adopt new business plans that are grounded in diversification and agility, HSBC said in a report (pdf). Businesses surveyed by the bank are setting long-term plans for their staffing and office arrangements, with some saying they are looking to cut back on their office spaces or production locations, and 69% telling the bank that “flexible working will become standard practice” as virtual work and meetings also become more commonplace.

Altogether, sustainability is the name of the game: Businesses are restructuring their own operations to increase sustainability, and some are also looking at environmental sustainability. To that end, companies are making changes to their supply chains in the next two years, either by diversifying, restricting or shortening their supply chain, or increasing the security of their supply chains “by identifying and securing critical suppliers.”

Some 42% of the world’s youth (ages 18-29) witnessed a fall in their incomes since the onset of the pandemic, according to findings by UN’s International Labor Organization (ILO). The pandemic’s impact on the youth was found to be “systematic, deep and disproportionate,” with young women, youth in lower-income countries, and youth working in “support services and sales-related occupations” bearing the brunt of the losses, the ILO report (pdf) said.

IPO WATCH- Banque du Caire’s IPO isn’t happening before 2021: State-owned Banque du Caire’s (BdC) plans to debut on the EGX won’t be seeing the light of day until next year once the covid-19 pandemic has subsided, Masrawy reports, citing unnamed sources familiar with the matter. The bank had planned to float 20-30% of its shares on the exchange in April but shelved the listing due to the market turmoil caused by the virus.

Background: BdC was hoping to raise some USD 500 mn via its IPO on the EGX in what was expected to be the country’s biggest sale of state assets since 2006. The European Bank for Reconstruction and Development, the Sovereign Fund of Egypt, and Abu Dhabi Development Holding were reportedly considering purchasing a stake.

DEBT WATCH- EBRD extends another USD 100 mn for trade finance through Banque Misr: The European Bank for Reconstruction and Development (EBRD) has approved another USD 100 mn facility to increase an existing trade finance limit to state-owned Banque Misr to help meet increased demand for import and export transactions, a bank statement said on Wednesday. This brings the total provided by the EBRD to Banque Misr this week to USD 200 mn following the agreement of another USD 100 mn facility for on-lending to SMEs impacted by covid-19. The agreement announced yesterday comes under the bank’s Trade Facilitation Programme, which aims to boost foreign trade between EBRD countries by underwriting international trade transactions made by banks. The EBRD has recently issued equivalent loans to CIB and the National Bank of Kuwait Egypt to shore up liquidity in the private sector, as well as USD 200 mn to the National Bank of Egypt for SME on-lending and trade finance.

M&A WATCH- Banque Misr has increased its stake in CI Capital Holding to 15.12% from 13.72%, according to a disclosure to the EGX (pdf). The state-owned bank purchased some 14 mn shares for EGP 58.11 mn at EGP 4.14 per share. Banque Misr is the largest shareholder in the financial services firm.

M&A WATCH- El Nasr gives Odin Investments green light to start due diligence: El Nasr Civil Works’ board of directors has given Odin Investments approval to begin due diligence ahead of a potential acquisition of a 90% stake in the company, El Nasr said in an EGX disclosure (pdf). Odin, along with other unidentified inventors, expressed interest in the acquisition last week, and received approval from majority shareholder Madinet Nasr Housing & Development (MNHD) to begin due diligence soon after. MNHD owns a 52.5% stake in El Nasr, while the Holding Company for Construction & Development holds a 19.3% stake. El Nasr’s workers’ union holds 5% and the remaining shares are listed on the EGX.

CABINET WATCH- Tougher (and more expensive) penalties for insulting state employees on duty under legislative changes to penal code: The Madbouly Cabinet greenlit in its weekly meeting yesterday amendments to the penal code to give the state sharper teeth to clamp down on insult and batteries against government employees on duty, according to a statement. The penalties apply to verbal insults and disrespectful gestures against state employees including court officials, police officers, healthcare workers, teachers, and academics. Also covered: Assaulting or resisting police officers, and encounters with public employees that result in injuries are among violations. These crimes now incur prison terms anywhere between one year and ten, and fines of up to EGP 100k. The penalties are tougher in cases pertaining to the harassment of judges or court employees while a court is in session. The amendments will now be up for a final vote by the House of Representatives before being signed into law by President Abdel Fattah El Sisi.

The changes are significant: As the century-old penal code currently stands, the fines for offending state employees are sometimes as low as EGP 200-500, meaning the new figures can be up to 500 times higher in some instances. Prison sentences are also generally lighter at the moment, ranging between three months and 10 years.

Penalties for vandalizing state-owned property: The changes set prison terms of up to one year and fines of EGP 100-200k for vandalizing properties and vehicles either fully or partially owned by the state, including educational facilities and public hospitals. If the action of vandalism is considered a terrorist act, the perpetrator can face a life imprisonment sentence.

Also approved by cabinet yesterday: Companies will be exempt from a requirement in the Unified Tax Act to hand the Tax Authority (TA) a detailed breakdown of its transactions with a subsidiary or related party based abroad if these transactions are worth less than EGP 8 mn. If proposed amendments to the act approved by cabinet yesterday pass the House, companies that are not exempt would be required to pay between 1-3% of the value of the transactions if they fail to submit the breakdown to the TA.

Other decisions from the cabinet table:

• Approving amendments to a law governing the Financial Regulatory Authority to require the FRA to improve how it measures its performance and compile an annual report that will be reviewed by the president, prime minister, and House of Representatives;
• Ratifying an Egypt-UAE double taxation treaty and agreement to prevent income tax evasion signed in Abu Dhabi last November.

EARNINGS WATCH- Sodic’s net profits fell 77% to EGP 40 mn in 2Q2020 from EGP 175 mn during the same period last year, it said in its earnings release (pdf). Revenues dropped 40% during the period to EGP 645 mn as 13% of gross sales were canceled. The latest quarterly figures mean the company’s net profits fell 80% during 1H2020 to EGP 68 mn, down from EGP 336 mn in the equivalent period last year. Revenues fell by almost 50% to EGP 1.07 bn during the six-month period. The number of units delivered fell from 441 in 1H2019 to 256 units this year, which the company attributes to covid-19 restrictions and the majority of deliveries being postponed to the second half of the year.

The company attributed the decline in profits during the second quarter to covid-19 lockdown measures and sales cancellations of EGP 130 mn, increasing cancellations for 1H2020 to EGP 320 mn. Sales seem to be reviving with the lifting of lockdown restrictions though, with gross sales for the year returning to 2019 levels after a rebound in July.

GB Auto posted net profits of EGP 115.8 mn in 2Q2020, rising from a net loss of EGP 8.9 mn during the same quarter last year, the company said in its earnings release (pdf). Revenues during the quarter dropped 29.3% y-o-y to EGP 4.03 bn. The company’s auto and auto-related (A&AR) segment’s revenues fell 38.6% y-o-y to EGP 2.89 bn as a result of the country’s lockdown measures. The company recorded net profits of EGP 254.2 mn in 1H2020 on revenues of EGP 9.91 bn.

Demand on passenger cars was hard-hit in April and May as the government’s lockdown measures, including a nationwide curfew and the shutdown of traffic departments, coincided with “the low seasonality associated with Ramadan and Eid,” CEO Raouf Ghabbour said. GB Auto’s commercial vehicle line of business also saw a slowdown during the quarter, as stagnant tourism and “corporate austerity measures saw limited fleet renewals.”

The company’s outlook is still upbeat, with a pickup in activity as of June setting expectations for a continued rebound throughout 3Q2020. The reopening of traffic departments “coupled with pent up demand” is already driving up foot traffic at GB Auto’s showrooms, while “a more streamlined regulatory environment” for two- and three-wheelers is also helping to put this line of business on an upwards trajectory.

Sarwa Capital’s net income dropped 42% y-o-y in 2Q2020 to EGP 36 mn, the company said in a press release (pdf). Net income after minority interest during the first six months of the year came in at EGP 127 mn, down 31% y-o-y from EGP 183 mn during the comparable period last year. The company is cautiously optimistic on signs of a recovery thanks to “the rebound in activity across many asset classes,” with management saying its businesses are well-positioned to capitalize on “shifts in the market.”

MOVES- Judge Abdallah Shoda was sworn in yesterday before President Abdel Fattah El Sisi as the new head of the Court of Cassation, the nation’s highest appeals court, according to an Ittihadiya statement. Shoda (bio) served as the court’s vice president since 1998. He now succeeds Abdallah Assr, who served as president since July 2019. El Sisi was granted the power to appoint the heads of the Court of Cassation, the Council of State (Maglis El Dawla), the State Lawsuits Authority, and the Administrative Prosecution Authority under amendments to the Judicial Authorities Act in 2017.

TPay Mobile has appointed Dheeraj Soni (LinkedIn) as the company’s chief operating officer, a company statement (pdf) said on Wednesday. Soni has served as former president and chief commercial officer at Docomo Digital Payments, as well as senior vice president at Swisscom.

Gihane Halawa (Linkedin) has been appointed the head of investor relations at Prime Holding after previously serving as the head of investment banking at subsidiary Prime Capital, according to a press release (pdf).

It’s a mixed bag of nuts for Egypt in the foreign press this morning. Among the stories to keep on your radar:

• Egypt’s social media storm against [redacted] harassment is still getting foreign coverage, with the Guardian being the latest to pick up the story.
• Voice of America looked at voter turnout in Egypt’s two-day Senate elections amid the summer heat and concerns about covid-19.
• Reaching a GERD agreement is in everyone’s best interest: Egypt and Ethiopia are both “highly unlikely” to resort to military actions in response to a breakdown in GERD negotiations, which would be a “huge setback for Ethiopia’s regional ambitions, says UK think tank Chatham House. Sudan is also keen on reaching an agreement, as its transitional authorities cannot afford to be tied up in another conflict, the piece argues.
• LGBTQ+ activists want more from Facebook in the fight against hate speech in Arabic, Reuters says.

Egypt’s Intelligence chief discusses finalizing South Sudan peace pact with president, SRF: General Intelligence Service head Abbas Kamel met yesterday with the leaders of the Sudan Revolutionary Front (SRF) putting the final touches on the South Sudanese peace pact by pushing for “a comprehensive agreement.” Kamel also separately met with South Sudanese President Salva Kiir during a visit to Juba with an Egyptian delegation of senior officials. Kiir — a longtime Egypt ally supported by the SRF — signed in 2018 a peace agreement with Vice President Riek Machar to end a five-year civil war between two warring factions. Separately, Kamel and Health Minister Hala Zayed inaugurated a new Egyptian medical center in the South Sudanese capital.

Obour Land will break ground before the end of the year on a new dairy farm expected to cost EGP 255 mn, investor relations head Ramy El Ghazaly said. The cheesemaker had originally planned to launch the project earlier but faced delays due to the covid-19 pandemic, and is currently in the process of obtaining necessary licensing, added El Ghazaly.

Three Chinese textile manufacturers have submitted requests to the General Authority for Freezones and Investment (GAFI) to set up new facilities in Egypt’s private freezones, the local press reports, citing unnamed government sources. The manufacturers including Handa, which expressed interest in setting up a factory worth USD 20 mn in Sharqia’s Belbeis to produce clothes to export to Europe and the US. GAFI is currently reviewing the requests before passing them along to cabinet for final sign-off.

The ICT Ministry signed two agreements with the US’ Purdue University to offer dual degrees to undergraduate students studying computer engineering or electrical engineering at Misr Informatics University — a new state university that will be set up in the new administrative capital, according to a cabinet statement. One agreement will see students spend their senior year studying at Purdue’s campus in Indiana to obtain a dual-degree, while the second will allow students to pursue a master’s degree in information security at Purdue for one year post-graduation.

The Egyptian General Company for Tourism and Hotels (EGOTH) is in talks with the National Bank of Egypt (NBE) for a EGP 400 mn loan to finance renovations of the Sofitel Winter Palace Hotel in Luxor, according to the local press. EGOTH — which is a subsidiary of The Holding Company for Tourism — will cover the remaining EGP 600 mn needed for the development. NBE is also in talks with the Holding Company for Tourism and Hotels for a EGP 1.2 bn loan to restore the historic Continental Hotel, Chairperson Mervat Hataba tells Al Mal. The renovations are expected to cost EGP 1.7 bn.

EFG Hermes’ Rx Healthcare Management has invested EGP 100 mn in meds producer United Pharma to finance expansion plans that include modernizing factories and R&D to manufacture new medicines, Al Mal reports, citing unnamed sources. Rx Healthcare Fund acquired a majority stake in United Pharma late last year through Nutritius Investment Holdings, a special purpose vehicle established for the acquisition.

Faragalla Group has signed a EGP 995 mn syndicated loan agreement with CIB, the Arab African Bank, and the National Bank of Qatar, Al Mal reports, citing unnamed sources familiar with the matter. The agreement covers a little less than half the EGP 2.05 bn in loans the company is looking to secure to increase its working capital and restructure its debt. The National Bank of Egypt arranged the loan.

The environment and manpower ministries are working on a plan to integrate Egypt’s informal garbage collectors into the formal economy, and will decide on a formal job title they can use on official paperwork, according to a statement. Both ministries have set up a joint working group to arrange meetings with representatives of the waste management industry to discuss new policies and incentives. This move follows a directive from President Abdel Fattah El Sisi to support irregular workers.

Nour El Assal, CEO and co-founder of Tagaddod: My Morning / WFH Routine looks each week at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is Nour El Assal (LinkedIn), CEO and founder Tagaddod.

My name is Nour El Assal, and I’m the CEO and co-founder of Tagaddod. Founded in 2013, the company collects and refines used cooking oils from businesses and households to become transformed into biofuel. It relies on technology to map and plan more effective routes for the collection of used cooking oil, turning what was otherwise a low tech industry with fairly slim margins, into something profitable and feasible.

I really don’t have a fixed routine: Even if I had some kind of a routine before, covid has changed all that. Some days are super busy and others are much more relaxed but my day never begins after 9am and I always start my day by reading Enterprise. One of the things that hasn’t changed over the past few months has been scrambling between the factory, office, and home almost everyday. On our busier days I wake up at 6am, maybe going for a run before heading to the factory for one of our weekly safety inspections. If I'm WFH I get to start a little later at around 8:30-9am by catching up with our three teams through online meetings and emails. I talk to our finance team about sales, operations and cash flow, our demand operations teams about recruiting new clients, and our factory team about our shipping and refining functions.

I started seriously WFH by mid-May: Even as covid reached its peak, I hadn’t yet personally started fully WFH. We were just about to launch a new business unit at the factory so I had to be physically present while things were still getting underway. Our Dokki offices where our finance, tech, sales and accounting teams are based were entirely working from home by mid-April, and by May we had only 20-30% of our team physically present, which meant about 4-6 people were at the office at any given time. Now we’re back up to 50-60% working at the office.

Tagaddod’s work culture already included a WFH component. It hasn't been terribly challenging to shift some of our operations to WFH transition because our online management platforms can be done remotely. Our factory never fully shut down but we were a lot more strict with our safety measures. Everyone has been getting their temperature checked daily, masks are required at all times and we’ve made sure to spread out everyone’s seating at the factory office space.

The biggest challenge was maintaining morale and grit: We had to keep reiterating our mission and manage our own expectations to make sense of everything going on and keep our heads cool. We decided that if we’re forced to stop we’ll stop — all we had to do until then was make sure to take things one day at a time to reduce people’s anxieties. Our whole team of partners and operations heads were crucial in getting through the worst of the pandemic and keeping us afloat.

Once we saw markets stabilizing we knew we needed to push forward really hard to get back on track to pre-covid levels of operation. The pressure from the crisis helped us refine the results-oriented work culture at Tagaddod.

Household operations almost doubled at the height of the crisis: People weren’t really eating at restaurants which we took as a chance to focus more on household cooking oil collection. It was really interesting to see major food chains’ output reduced to 20% of their normal production at the height of the outbreak while non-chain and single brand restaurants in less affluent neighborhoods of Cairo were operating almost 75-80% of pre-covid levels. European markets, where we mainly export, were significantly less volatile than US markets and didn’t hold this sense of panic. There was increased demand for used cooking oils at the tail-end of the first wave actually.

As an entrepreneur you’re familiar with the panic and anxiety that comes with having something on the verge of ending. I actually felt a little bit more at ease once everyone began sharing the panic. This was particularly pronounced with other entrepreneurs, who were surprisingly very positive. We’re constantly living in uncertainty and have a lot on the line, so I think that has prepared me to handle the situation. At the end of the day you have little control over things like this, so you have to take things one day at a time and be adaptable.

I’m a huge fan of audio content: I’ve been listening to Reid Hoffman’s podcast Masters of Scale recently and I'm generally interested in audio books on business, behavioral economics and what some of my friends and I call ‘financial fiction’ novels. One Tn USD by Andreas Eschbach is a great one that falls under the genre.

On Netflix I like some educational stuff like Connected, History 101 and Explained along with some light content like Community and Brooklyn Nine-Nine while eating.

One of the things that made me think this has to blow over is that the world doesn’t go bust — the world survives catastrophes one way or another. Don’t lose sight of the day-to-day but be willing to adapt. I'm not advocating for being positive, but rather for being sensible. This isn't a recipe for success by any means, because if a crisis of this magnitude were to hit at a different stage in the company’s development, we could have been in a very different situation than we are now.

We’re revisiting expansion plans once everything goes back to normal. And on a personal level, I’m looking forward to getting back on a plane for a much needed vacation.