Did Egypt’s megaprojects cushion the economic impact of The Great Lockdown?

It’s another busy news day as we speed toward the week’s end, starting with the fact that bank hours just got a little bit longer.

Banks will be open to the public for an extra hour each day beginning September 1, with branches open to customers from 8:30am until 3pm, while employee hours will run from 8am until 4pm. The change comes as the Central Bank of Egypt rolled back some covid-19 restrictions in a circular (pdf) out yesterday. Since May, banks have been allowed to open their doors to customers from 9:30 am until 3 pm.

The next step in the drawn out and contentious GERD talks is expected to take place this Friday, when the tripartite technical committee releases its report to the African Union, which is mediating the dispute. We have more, including coverage of Ethiopian Prime Minister Abiy Ahmed’s visit to Khartoum yesterday, in this morning’s Diplomacy + Foreign Trade, below.

SIGN OF THE TIMES- Global law firm Linklaters is going to allow its more than 5k staff to work half the time remotely, which the Financial Times says is “the strongest sign yet that changes ushered in by the pandemic are beginning to take root in a legal industry that has long valued tight-knit office culture.” The firm said in a LinkedIn post announcing “new global agile working policy” that it will also allow staff to have “flexible start and finish times, modified daily ‘core’ hours, and modified hours to allow for commitments outside of work.”

TIP OF THE MORNING- Still struggling to hold onto your sanity while WFH? Take cues from a Buddhist priest, a field manager in Antarctica and an astronaut, who have learned to thrive despite having intense jobs in largely isolated settings, Arianne Cohen writes for Bloomberg.

Tried and true tips to avoid burnout: Learn to take a break effectively — incorporate “short pauses” throughout your day in which you shake up what your mind and body are engaged in. That means taking a quick walk or otherwise squeezing in physical activity, listening to music, or reading something not related to work. And once you come back to your desk, try to remind yourself, on a deeper level, of why you’re doing the work that you’re doing to nurture a sense of purpose and passion that “can really get you through rough patches.”

The Health Ministry reported 141 new covid-19 infections yesterday, up from 138 the day before. Egypt has now disclosed a total of 97,619 confirmed cases of covid-19. The ministry also reported 18 new deaths, bringing the country’s total death toll to 5,298. We now have a total of 67,717 confirmed cases that have fully recovered.

Egypt and China will sign next month an agreement to start working together on a covid-19 vaccine, the Health Ministry said in a statement. State-affiliated vaccine manufacturer Vacsera is signing on the Egyptian side. Egyptian scientists are in the third stage of clinical trials on a homegrown covid-19 vaccine, and the ministry has simultaneously contacted six international manufacturers to get its hands on an internationally developed vaccine as soon as possible. Russia could also potentially manufacture its Sputnik V vaccine here in Egypt, we noted earlier this week.

REMINDER- All travelers to Egypt — including Egyptian citizens — to Egypt need to show a negative PCR test prior to boarding and on arrival in Egypt starting next Tuesday, 1 September. National flag carrier EgyptAir has more on its website. The test needs to have been completed within 72 hours of flying to Egypt.

Visa services outfit VFS Global is the latest to try to get in on the PCR test game, giving would-be travelers in Egypt, the United States, Saudi Arabia, the UAE and eight other countries the ability to book a PCR test online. The tests in Egypt cost EGP 3.4k (at a testing center or at-home service), with results on email within 36 hours. Travelers booking from the US get results in 48 hours through a partner lab.

Luxor and Aswan’s reopening on 1 September couldn’t be happening sooner for tourists from Japan, Italy, France, Belgium, and the Netherlands, who have apparently been submitting regular inquiries on when the popular tourist cities will begin accepting visitors again, a local tourism player told Al Mal yesterday. The expectation is that Upper Egypt travel will pick up in December for the winter season after Nile Cruises resume in October. Cabinet’s covid-19 crisis management committee earlier this week authorized the reopening of temples, archaeological sites, attractions, and museums starting September.

All parks and specialized gardens around Cairo will open to the public starting today, with a maximum capacity of 50%, Cairo governorate said, according to Masrawy.

Careem Egypt has resumed new driver registration after a pause for several months since the pandemic broke out, one of its certified agents said.

For the first time in the Red Sea, Somabay launches the newest destination app which provides fully fledged integrated services (available here for iOS users and here for Android) in line with supporting the company’s plans for digitizing hotel guests’ experiences using trending technologies.

IPO WATCH- PayPal Mafia boss Peter Thiel thinks he’s in line to make a killing as data outfit Palantir goes public — and he and his co-founders are using a three-tiered governance structure to still retain control of the US government’s favourite provider of data analytics to the intelligence, military and law enforcement communities. In a move totally congruent with Palantir’s ethos, the company’s listing filing “has sought to draw a clear line between its own business and what it dismissed as the ‘idiosyncrasies and excesses’ of the rest” of Silicon Valley (which, incidentally, it is leaving for Denver, Colorado), the FT reports. The notoriously secretive data company is going after a direct listing (think: Slack and Spotify), with shares likely to start trading in September.

You can read Palantir’s S-1 filing here, and the Verge and MarketWatch have more.

While Palantir’s listing is not really an IPO, Jack Ma’s payment company Ant Group is filing for a USD 30 bn IPO on the Shanghai and Hong Kong stock exchanges in a transaction that could potentially raise a hair more than Aramco pulled in last year (was it really only last year? Not last decade?) when it listed on the Tadawul. Fat profit margins and 1 bn users underpin the Alibaba affiliate’s bid for a USD 225 bn valuation. Bloomberg and the WSJ have more and you can check out Ant’s IPO filing here (pdf).

With low borrowing costs and yield-hungry investors, Abu Dhabi is hitting the debt market to shore up its cash buffers. The emirate is marketing a triple-tranche USD-denominated debt offering that is expected to reel in USD 5 bn, Bloomberg reports, citing a source familiar with the matter. The bond offering, which comes as Abu Dhabi looks to shore up its finances amid a still-weak outlook for oil prices that is continuing to weigh on its covid-roiled economy, will include a 50-year fixed income treasury — its longest-ever bond tenor. With a AA credit rating, Abu Dhabi’s debt is expected to garner significant interest from investors “thirsty for yield,” said Todd Schubert, head of fixed-income research at Bank of Singapore.

And speaking of the hunt for cash: Kuwait’s state treasury is on track to run out of cash to pay out government salaries by November as the pandemic and collapsing oil prices pushed the Gulf country into a liquidity crisis and forced it to burn through its reserves just to stay on top of state payrolls, Bloomberg reports. It’s looking like Kuwait’s only viable exit strategy is to take on loans from international lenders, but lawmakers with budget reform on their minds are pushing back.

US Secretary of State Mike Pompeo wants to see the the rapprochement between the UAE and Israel have a domino effect across the rest of the Arab world, saying at a press briefing with Israeli Prime Minister Benjamin Netanyahu earlier this week that formal diplomatic ties with Tel Aviv are key to bringing stability to the region. Top aides to US President Donald Trump are due in the UAE next Monday alongside an Israeli delegation to talk strengthening the UAE-Israel agreement, reports Reuters.

Sudan may be next in line as it looks to continue its rehabilitation in Washington: Pompeo flew to Khartoum on the first non-stop flight between Israel and Sudan yesterday to meet with Prime Minister Abdalla Hamdok yesterday for talks that Hamdok said were “direct and transparent,” but Hamdok told Pompeo he doesn’t have the mandate or authorization to normalize ties with Israel.

*** 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: We interrupt our series on why we still get power cuts in the midst of an electricity surplus to bring you a special report on Egypt’s first major transit hub, which lies at the end of the proverbial rainbow that is the fourth phase of the EGP 32 bn Cairo Metro Line 3. We explore why it was built, what it took to build it, and what is its significance beyond railway infrastructure.

The highlight of last night’s talk shows was Consumer Protection Authority (CPA) boss Ahmed Samir Farag breaking down the CPA’s decision to refund a portion of school bus fees in a phone-in to Ala Mas’ouleety. We have the story in this morning’s Speed Round, below.

The CPA settled on requiring schools and universities to refund 25% of bus fees from the last academic year by crunching the numbers on how much of the full year schools were actually in session before transitioning to online learning, Farag told host Ahmed Moussa. President Abdel Fattah El Sisi had first ordered schools and universities to shut down in mid-March in what was originally meant to be a two-week measure. Farag stressed to Moussa that parents must file complaints to alert the agency of any cases of non-compliance from schools on the repayment decision, which is punishable by law (watch, runtime: 7:40).

PCR test requirements weighing on tourism bookings? Some tourists have apparently been canceling their hotel reservations in Egypt’s resort towns because of the government’s (very sensible) requirements that incoming tourists provide negative PCR test results, Chamber of Tourism Establishments member Waheed Assem claimed. Assem told Moussa that, in comparison to the low cost of spending one week in Egypt (which he put at around USD 150), a PCR test is too expensive. He suggested offering subsidized tests at Egypt’s airports, or throwing caution to the wind and doing away with the testing requirement for travelers to South Sinai and the Red Sea (watch, runtime: 12:13).

Uh, let’s not do away with the PCR tests just yet, ‘k? Thanks. Love, Enterprise.

Meanwhile, Endowments Minister Mohamed Mokhtar Gomaa debriefed Moussa on preparations for the resumption of Friday prayers at “major” mosques across the country, including a shortened sermon and regular disinfection (watch, runtime: 27:10).

Did state megaprojects cushion the unemployment blow by covid-19? While unemployment has accelerated since the onset of the covid-19 pandemic, reaching a two year high of 9.6% in 2Q2020 up from 7.7% in 1Q2020, national megaprojects may have “cushioned the negative impact of the covid-19 pandemic on Egypt’s economy, especially growth and employment,” argues economics professor at the Sadat Academy for Management Sciences Abdel Mottaleb Abdel Hamid, according to Al Monitor.

The building and construction sectors were the most resilient in the face of The Great Lockdown: Where retail and wholesale were decimated — shedding 624k jobs — building and construction remained the sector least impacted by the broader economic downturn, only losing 288k jobs since the start of the outbreak, according to Capmas figures. Large infrastructure projects including the new administrative capital, New Alamein and New Galala — which are highly labor intensive — avoided some of the disruptions experienced by other sectors in the economy and continued work on schedule, Abdel Hamid says.

Infrastructure-driven growth? Some observers have attributed our 3.8% GDP growth in FY2019-2020 — which comes as private-sector investment slowed between the months of April and July — to have been in large part supported by the government’s megaprojects, which were “a pillar of growth during the partial lockdown,” said Abdel Hamid. “Without the megaprojects, the impact would have been more rigorous,” said Mostafa El-Fiky, financial planner at Saipem.

EGX to claim 30% ownership of commodities exchange; who will own the futures exchange still to be determined: The EGX is staking its claim to the as of yet unestablished commodities exchange, according to statements by EGX Chairman Mohamed Farid picked up by Al Mal. The EGX will hold a 30% stake in the exchange. The EGX’s stake is part of the government’s 50% ownership share in the new exchange, with other shareholders set to include the General Authority For Supply Commodities (GASC), the Internal Trade Development Authority (ITDA), and the Egyptian Holding Company for Silos and Storage, according to previous statements by Supply Minister Ali El Moselhy.

49% of the EGP 100 mn exchange will be held by (mostly state-owned) commercial and investment banks, as well as a host of other state and quasi-state entities, such as Misr for Central Clearing, Depository and Registry (MCDR), the state Insurance Holding Company, the Federation of Egyptian Chambers of Commerce. State-owned banks expected to hold those shares include Banque Misr, the National Bank of Egypt, and the Agricultural Bank of Egypt. EFG Hermes and CIB are the two standouts from the private sector said to be likely to take a stake.

But Enterprise, wasn’t the commodities exchange already established in March? No it wasn’t. The domestic press appears to have jumped the gun on this back in March. The latest statements by Farid indicate that the ownership stakes have yet to be determined, as is the establishment of the exchange’s electronic trading platform. A final decision on which commodities will be traded still hasn’t been made, although ITDA head Ibrahim Ashmawy assures Al Mal that this “is happening soon.”

We’re waiting to hear back from the EGX on whether trading in the exchange will start in September as earlier announced.

Background: The Egyptian Commodity Exchange was given the greenlight by the Cabinet in January. The exchange was expected to initially trade in six commodities — wheat, rice, corn, potatoes, onions, and oranges. It is unclear whether these commodities will underpin the as of yet established commodities future exchange.

And speaking of the futures exchange, a meeting yesterday to set the regulations governing it has yet to determine whether the private sector will be allowed to own shares. One thing that was made clear is that 75% of shares in the exchange — which will launch derivatives trading in Egypt — must be held by one or more financial institutions, whether they be state-owned or private, according to statements by FRA chief Mohamed Omran (pdf) at the meeting. The meeting was attended by MCDR, the EGX, as well as private-sector commercial and investment banks, insurance companies and representatives from the EBRD and the International Finance Corporation. Omran closed out the meeting by forming a working group to draft the regs and guidelines for the exchange. It is still unclear when this will be launched.

It’s official: Parents are entitled to a 25% refund of last year’s school bus fees. The Consumer Protection Authority (CPA) has issued a decision requiring schools, higher education institutions, and third-party transportation providers to refund 25% of school bus fees paid for the 2019-2020 academic year, according to a statement. Students returning to school this fall will receive the rebate as a discount from the 2020-2021 academic year which begins next month. Those who either graduated or who have since changed schools will be getting their 25% in cash within no more than 30 days, the CPA said. CPA Head Ahmed Samir previously said that non-compliance will lead to fines of between EGP 10k and EGP 1 mn, with repeat offenders slapped between EGP 20k and EGP 2 mn.

Background: Parents have complained that they were made to pay bus fees despite students moving to online learning after the government closed schools due to covid-19. Parents and guardians are also complaining over schools continuing to charge them for canceled on-campus activities, and not providing the option to pay the upcoming year’s tuition fees in installments. Read our Blackboard features (here and here) for more on the back-and-forth.

Pundits call on CBE to renew debt payment holiday: Banking experts polled by Mubasher have come out in support of the Central Bank of Egypt (CBE) extending the six-month pause on interest payments to commercial banks that is set to expire next month. Banking expert Khaled El Shafei and Alraya Consulting CEO Hany Abou El Fotouh argue that manufacturers — particularly those in heavy and energy-intensive industries — continue to face supply disruptions, and several industries are also under pressure from rising energy prices. An extension of the debt moratorium could also be of particular benefit to real estate developers, who are still reeling from a pandemic-induced slowdown in sales and liquidity crunch, says Mohamed Hassan, the managing director of asset management firm Medaf.

We noted earlier this week that an extension could be in the cards after banks were asked by the CBE to compile a shortlist of large corporate clients most affected by the crisis.

Background: The CBE ordered banks to offer clients a six-month pause on payments on the same day it enacted a historic 300 bps interest rate cut at the onset of the pandemic in March to stimulate the economy. The central bank also launched a debt relief initiative for individuals at risk of default and expanded strategic lending activities, among other measures. Optimism that the bank will continue lending a helping hand saw the EGX outperform its regional peers on Sunday. Non-bank finance players are also offering payment holidays to clients at the direction of the Financial Regulatory Authority and the EGX.

M&A WATCH- Odin Capital to set up EGX equity, VC funds worth a combined EGP 1 bn by September: Odin Investments is hoping to close on its EGP 500 mn joint fund with Saudi’s Kasb Capital to invest in Egyptian equities and launch it by next month, Odin’s Deputy Chairman Hashem El Sayed tells Al Mal. Odin will hold a 55% stake in the new fund, while Kasb will own 45%. Odin also said last week it plans to separately form a venture capital fund, which El Sayed said will also be worth EGP 500 mn. He expects the fund to be ready to launch in September as well. The VC fund is expected to hold majority stakes of over 51% in the companies it will invest in, says El Sayed (although we’re not sure startup founders nowadays are willing to give up that much ownership). El Sayed wasn’t clear on where these investments will be deployed, except to say that they are looking to invest in manufacturing, and are already eyeing two acquisition prospects. Odin’s latest activities include an intention to buy El Nasr Civil Works from MNHD.

Both are part of four funds Odin plans to establish, for which they are currently seeking approval from regulators, according to a bourse filing last week (pdf). These include a fund that will invest in SME financing companies, and another PE fund specializing in edutech. The size of the other funds was not disclosed.

M&A WATCH- Engineering firm Daoud Group to acquire MNHD’s Nasr Utilities: Mohammed Ahmed Daoud for Engineering and Industrial Investments (Daoud Group) is reportedly the company that has made an EGP 30 mn offer to acquire Madinet Nasr for Housing and Development (MNHD) subsidiary Nasr Utilities and Installations (NUI), according to Hapi Journal. Daoud Group will be moving ahead with the acquisition within the next few days. MNHD’s board earlier this week greenlit Daoud Group’s offer for a 98.4% stake in the construction company, while MNHD subsidiary El Nasr Civil Works signed off yesterday (pdf) on Daoud Group’s offer for the remaining 1.6% stake in NUI.

Maersk’s guarantee policy has trucking companies up in arms: The Alexandria Chamber of Commerce’s land transport division is lobbying the Madbouly government to intervene in the Danish shipping giant Maersk’s plans to increase the value of the letters of guarantee it requires from transport companies, which the division says could put freight companies and local logistics players out of business, Al Mal reports.

Earlier this month, Maersk announced that it would raise the value of guarantees it requires from trucking companies that haul its containers in Egypt. Maersk currently requires a EGP 250k guarantee for any container it transfers to trucking companies, but will now hike this to EGP 1 mn for containers of dry goods (with a bank cheque of EGP 2 mn) and EGP 3 mn for refrigerated containers (with a bank cheque of EGP 6 mn). The company said it will phase in the higher LG requirements. Shipping companies, which own the containers, typically require financial guarantees to guard against loss, damage, or theft of containers under the charge of haulers.

Tensions between Greece and Turkey escalated as both countries held rival naval drills in the eastern Mediterranean amid a simmering dispute over energy exploration in the region, Reuters reports. The NATO members both issued an advisory on Sunday saying they’d be conducting naval drills off the Greek island of Crete. Each described the other’s maneuvers as illegal.

Erdogan escalates hostile rhetoric: Turkey President Tayyip Erdogan on Monday accused Greece of “sowing chaos,” prompting Greek government spokesman Stelios Petsas to reply that Athens will be “responding calmly and with readiness both on a diplomatic and on an operational level” to defend its sovereign rights.

Germany steps in to cool heads: Germany’s Foreign Minister Heiko Maas visited Athens and Ankara separately on Tuesday to mediate the dispute. He urged resumed dialogue, describing the situation as “playing with fire, with any small spark potentially leading to catastrophe,” Bloomberg reports. Germany’s intervention last month succeeded in persuading Ankara to pause its activities in the Meditterranean, but that was short-lived. A ministry spokesman had previously said that Germany “regrets” Turkey’s decision to extend its exploration work at sea. Germany, as one of the largest economies in Europe, represents a major customer that will be buying the gas from the contested region.

Beyond its bullying-as-foreign-policy strategy, Turkey has been attempting to emerge as a regional energy power. Turkey announced last Friday a major gas discovery on the Black Sea that could potentially transform the sultanate from a mere consumer and cross-border conduit for gas trade to a sizable regional producer.

Meanwhile, Greece’s parliament is set to ratify today a maritime accord it signed with Egypt. Parliament last week ratified the accord with Greece to create a joint exclusive economic zone in the eastern Mediterreanean. The accord aims to advance both countries’ ambitions to maximize their utilization of the resources available in the region, marking a step towards more natural gas exploration and extraction for Egypt. The move has naturally made the Sultanate all the more thirsty.

And speaking of EastMed: Egypt and Jordan purchased USD 560 mn-worth of gas from Israel’s Leviathan in 1H2020. Egypt’s Dolphinus Holding and Jordan’s National Electric Power Company (NEPCO) bought a combined 4 bcm of natural gas from the Israeli Leviathan field during 1H2020 worth some USD 560 mn, Haaretz reports. Egypt received its first natural gas shipment from the Israeli concession earlier this year, almost two years after the countries signed a landmark USD 15 bn agreement import agreement that would see more than 85 bcm of gas delivered to Egypt over the next 15 years. Exact figures on the breakdown of the aggregate sales were not specified however.

(Editor’s Note- The Haaretz article says 1H2019, but since Israel didn’t start selling gas until January 2020, it’s a safe assumption that it meant 1H2020).

MOVES- Prime Minister Moustafa Madbouly has renewed Mohamed Ahmed Abdel Wahab’s term as the chief executive of the General Authority for Investment for one more year, according to a cabinet statement. Abdel Wahab, who was formerly an Investment Ministry consultant, assumed the position last year, succeeding the late Mohsen Adel, who passed away from covid-19 complications in June.

Fine Hygienic Holding has appointed Ahmed El Fakharany as its new general manager and chief commercial officer for Egypt, the tissue paper manufacturer said in a press release (pdf). El Fakharany’s most recent role was at Phillip Morris, where he served as the commercial head for Egypt and the Levant region.

The order to arrest the alleged gang involved in the so-called “Fairmont Incident” is leading the conversation on Egypt in the foreign press this morning, with Arab News and Reuters among those taking note. Al Fanar Media, meanwhile, was out with a story on how victims of [redacted] assault are accusing university administrations of negligence and failing to stamp out harassment.

Elsewhere in the foreign press: Arab News picks up on the idea of a tourism recovery in Egypt in the near term, even with strict measures and requirements that could be cumbersome for travels. Amnesty International was also out with a statement on human rights defender Bahey El-Din Hassan’s sentencing to 15 years in prison.

Regional politics — particularly tensions in Libya — are the order of the day on the diplomatic front this morning.

Egypt is not in favor of withdrawing Libyan National Army (LNA) forces from the strategic Libyan cities of Sirte and Jufra and turning them into demilitarized zones, Military Intelligence head Khaled Megawer said last week during a meeting with General Khalifa Haftar, Al Monitor reports. Egypt also stressed its rejection of a proposal to divide Libyan territories.

Egypt, Jordan, and Iraq commit to boosting coordination on Libya: President Abdel Fattah El Sisi, Jordan’s King Abdullah, and Iraqi Prime Minister Mustafa Al Kadhimi agreed during a trilateral summit in Amman yesterday to cooperate on reaching a political resolution to the situation in Libya, Ittihadiya said. The three leaders also touched on expanding economic, energy, and infrastructure cooperation and joint investments, as well as regional developments in Syria and Yemen.

And speaking of Iraq: Baghdad wants to lean on Egyptian construction companies to help with its post-war reconstruction efforts, Iraqi Contractors Federation Chairman Ali Senafi told Housing Minister Assem El Gazzar yesterday.

Closer to home, Ethiopia and Sudan agreed yesterday to step up efforts to reach an agreement with Egypt on the Grand Ethiopian Renaissance Dam, according to a statement cited by Reuters. The ongoing talks, which seek an agreement on rules to operate and fill the dam, should position GERD as an instrument that promotes regional integration, the two sides said.

The Armed Forces and the Texas Military Department plan to sign a long-term agreement that will see Egypt join the State Partnership Program and cooperate with the Texas-based national guard to conduct joint training exercises, the US embassy in Cairo said.