EFG, GB Capital close Tokio Marine Egypt Family Takaful acquisition

Good morning, friends — can you believe it is almost September? Our favourite month of the year gets underway on Tuesday. Among the highlights to which you can look forward this coming month:

• Mandatory covid testing: All arrivals to Egypt (citizens, tourists and residents alike) need to produce a negative RT-PCR test for covid-19 starting Tuesday, 1 September.
• Museum and archaeological sites are set to reopen nationwide on Tuesday;
• New school year: Look for a gov’t announcement on the shape of the new school year sometime in the first week of September;
• PMI figures for August will land on Thursday, 3 September;
• Foreign reserves figures should be out early next week;
• Runoff elections for Senate seats are scheduled for 8-9 September. Look for final results on the 16th.
• Inflation data for August should be out on or around Thursday, 10 September;
• Interest rates next come up for review at the CBE on Thursday, 24 September.

The Union National Bank (UNB) in Egypt rebadges as Abu Dhabi Commercial Bank today four months after UNB’s parent company in the UAE merged with ADCB and Sharia-compliant lender Al Hilal Bank in April to create one of the Emirates’ largest commercial lenders.

SIGN OF THE TIMES- US stocks are headed for their best August since 1986, the Financial Times reports, but a sharp upticks in layoffs suggest companies around the world still face “years of pandemic-related disruptions” and “herald economic pain ahead,” the Wall Street Journal and Bloomberg note.

Egypt’s covid-19 infection rate is still above 200: The Health Ministry reported 237 new cases of covid-19 on Thursday, the highest daily tally in almost a month. The single-day toll fell back to 212 yesterday from 223 on Friday. Cases are up from a low of 89 a week ago today. Egypt has now disclosed 98,497 confirmed cases of covid-19. The ministry also reported 14 new deaths, bringing the country’s total death toll to 5,376. We now have a total of 71,302 confirmed cases that have fully recovered.

Transportation services for tourists will resume starting 1 September, under new guidelines issued by the Tourism Ministry on Friday. Larger buses will be allowed to operate at 50% capacity while smaller cars are capped at two passengers at any given time. Drivers and passengers will be required to wear face masks during trips. This comes as authorities prepare to reopen archaeological sites and museums to tourists on 1 September.

VACCINE WATCH- A Chinese vaccine could be destined for Egypt: A covid-19 vaccine being developed in China could be made available in Egypt within four months if it proves effective, according to statements by a Health Ministry spokesperson cited by Masrawy. The Health Ministry said last week that the two countries will sign next month an agreement to start working together on a covid-19 vaccine. 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.

EgyptAir is now operating at 45% of its pre-covid capacity for the first time since the country resumed international flights on 1 July, Al Shorouk reports.

The carrier is also offering discounts on tickets to select European destinations booked before 15 September, Al Mal reports.

Delivery Hero to purchase InstaShop for USD 270 mn as it eyes MENA expansion: German takeout delivery service Delivery Hero is reportedly buying Dubai-based online grocery marketplace InstaShop for some USD 270 mn as delivery services and stay at home dining soars under covid-19, Reuters reports. InstaShop operates in Egypt, the UAE, Qatar, Bahrain, and Lebanon.

The UAE has formally dropped its boycott of Israel, in the latest concrete sign that the normalization agreement signed between the two countries is swiftly moving forward, the UAE’s state news agency WAM reports. Also this weekend, Israel listed the first ever commercial flight to UAE on Friday, with the El Al plane set to land in Abu Dhabi on Monday, according to the Associated Press. In the latest show of the budding bromance, the Israel Airports Authority numbered the flight LY971, a nod to the UAE’s international calling code number, while the return flight to Tel Aviv on Tuesday will be numbered LY972, Israel’s international calling code, writes Bloomberg.

Japan’s Prime Minister Shinzo Abe, 65, stepped down on Friday citing health reasons, writes the New York Times. The nationalist leader announced his resignation just four days after setting the record for the longest serving prime minister.

The end of Abenomics? Abe’s self-titled economic program ramped up state investment, eased monetary policy and cut regulations in a bid to haul the Japanese economy out of years of stagflation. The reform program saw Japan’s economy experience its longest run of post-World War II growth, unemployment fall to a 25-year low and the country’s main stock index double in value, according to The Wall Street Journal.

Correction (30/08/2020): A previous version of this article incorrectly stated that as of 1 September inbound travellers to Egyptian airports have to possess PCR test results taken no earlier than 48 hours before arrival.

Ahmed Moussa effectively had the airwaves to himself last night, with the other talking heads delivering little of note.

Some students will find out today what they’ll study this fall: Ala Mas’ouleety’s Ahmed Moussa spoke with Higher Education Minister Khaled Abdel El Ghaffar, who said that the first bunch of university admissions will be announced today. The ministry is announcing university placements over several phases rather than all at once. Abdel El Ghaffar said that around 30% of science students achieved a score of over 95% in their exams, which has resulted in a large volume of applications to the faculties of physiotherapy, dentistry, pharmacy, medicine, and engineering (watch, runtime: 3:31), (watch, runtime: 2:43).

No quarter for building violators: Moussa also spoke with Local Development Ministry spokesperson Khaled Qassem, who said that the government will act decisively against people who build illegally on government land. Qassem said that the ministry had reclaimed 3.8 mn square meters and 7,114 feddans of state property, and they addressed 3,885 violations cases on the agricultural lands (watch, runtime: 9:45). President Abdel Fattah El Sisi yesterday threatened to deploy the military to crack down on violators during a speech at the inauguration of several national projects in Alexandria. We have more in this morning’s Speed Round, below.

Expansion of natural gas grid: Moussa spoke with the prime minister’s media advisor, Hani Younes, who said that the number of citizens who received natural gas to their homes rose by 5 mn people in the period spanning 2014 to 2020. Younes added that the government has spent EGP 6 bn on developing Nasser City west of Assiut (watch, runtime: 8:32).

Egypt’s economy faces “intermediate risk” from covid because of its reliance on tourism, the European Investment Bank (EIB) said in its Economic Vulnerability Index report (pdf). That places us among the 63% of all middle-income countries who face that level of risk. “The pandemic and restrictions on the movement of people have all but wiped out tourism … and a global recession is expected to diminish tourist revenues long after restrictions are removed,” says the report, which assesses countries outside the EU. Morocco and Tunisia also face similar threat levels, with the general rule being that countries highly reliant on tourism are facing more “elevated risks.”

This comes as tourism stages a modest comeback of late: As of last week 126k tourists had visited the country since inbound tourism resumed on 1 July and both charter and scheduled flights are back.

But we’re still facing challenges — TUI cancels Egypt holidays: TUI on Friday cancelled all charter flights that were scheduled to depart to Egypt on or before 13 September.

A drop in remittances, another key source of foreign currency, also heightens Egypt’s economic vulnerability as the country is “reliant on this form of revenue,” says the EIB.

Other risk factors: Egypt’s “health system and demography” and the capacity of its banking sector were judged by EIB to be highly vulnerable to the covid-19 fallout.

M&A WATCH- EFG Hermes and GB Capital have closed their acquisition of 75% of Tokio Marine Egypt Family Takaful, the two companies said in a press release (pdf). The EGP 84.75 mn transaction gives each of EFG Finance and GB Capital a 37.5% stake in the life insurance company. Tokio Marine Egypt’s Japan-based parent company will retain the remaining 25%.

The company will be rebranded within the coming months, with Sohail Ali as its newly appointed CEO. “With over two decades of insurance experience across multiple markets, Ali will lead the company to establish a comprehensive suite of innovative insurance products and services,” the statement said.

EFG’s strategy to expand its NBFS business: “In four years, we were able to not only grow our traditional lines of business, but also introduced leasing, microfinance, consumer finance, fintech, factoring, digital payments, mortgage and insurance,” EFG CEO Karim Awad said. The region’s leading investment bank plans to see non-banking financial services accounting for 50% of its profits by the end of 2021. Non-bank services accounted for 25% of revenues in 2019.

For GB Auto, “the move aligns perfectly with our vision for the future … which sees our NBFI business expanding as we diversify our portfolio of offerings,” said CEO and Chairman Raouf Ghabbour. Both EFG and GB Auto are also partners on Bedaya, a mortgage finance company between GB Capital, EFG and Talaat Moustafa Group expected to launch soon.

Advisors: Local law firm Al Tamimi and Company and US-based White & Case acted as legal advisors on the transaction, sources told us.

In other EFG news, the investment bank is planning to expand its business in Nigeria to include trading fixed-income securities, Ali Khalpey, who leads EFG Hermes in frontier emerging markets, was quoted as saying by Bloomberg. The firm has two IPOs in the pipeline for execution next year, both of which will be in the financial services sector, and one in Nigeria, said Khalpey, without going into details.

Auto sales rebound in July: Auto sales showed signs of recovery in July from a downturn in the second quarter caused by the covid-19 pandemic, according to industry data released yesterday. Figures released by the Automotive Marketing Information Council (AMIC) showed sales rising 14.4% y-o-y in July to reach 18.3k vehicles, compared to 16k vehicles last year. Sales volume fell by as much as 26% during the government’s partial lockdown of the economy, which caused dealerships to close and consumer demand to fall.

In detail: The rise was driven mainly by bus sales, which increased 58.9% to 2.4k vehicles, compared to 1.5k vehicles sold last July. Trucks sales rose 15% to 3.3k vehicles, compared to 2.9k last year. Sales of passenger cars jumped around 8% to 12.5k vehicles, compared to 11.5k sold in July 2019.

DEBT WATCH- BariQ, Raya’s recycling unit, receives FRA approval for a EUR 40 mn green bond offering: The Financial Regulatory Authority (FRA) has greenlit Raya Holdings’ subsidiary BariQ’s EUR 40 mn green bond issuance, unnamed sources told Al Mal. The company plans to take the green bonds to market by early 2021 to finance the expansion of its recycled plastic food packaging operations. The offering is expected to “garner support” from some of the leading multilateral finance institutions, said the sources, who didn’t elaborate on what form this support will take.

Advisors: BariQ has reportedly tapped Misr Capital as financial advisor for the issuance and Zaki Hashem & Partners as legal counsel.

2020-21 is the year of green bonds in Egypt: CIB is on track to issue Egypt’s first green bonds, working alongside the International Finance Corporation (IFC) to finalize the issuance through a private placement this quarter, Heba Abdellatif, head of debt capital markets at CIB, told Enterprise in June. The government, meanwhile, has been working to issue up to USD 500 mn worth of green bonds in FY2020-2021, Assistant Finance Minister for Debt Khaled Abdel Rahman told Enterprise. This small issuance would mainly serve to test the markets’ appetite and gauge investors demand and the interest rates they would be seeking.

INVESTMENT WATCH- Hutchison Ports has signed a USD 730 mn agreement with the Egyptian Navy to build and operate a container terminal in Abu Qir naval base in Alexandria, according to a Hutchison statement. The terminal will be financed primarily by a joint venture between Hong Kong-based Hutchison and the Egyptian Navy; it will be capable of handling mega vessels and have a maximum capacity of 2 mn twenty-foot equivalent units (TEU) with a 60 hectare terminal yard once the project is complete. Connection through a new two-way highway that will link the terminal to Alexandria and Cairo is also expected upon completion of the project.

Construction on the first phase of the terminal will begin in 2022 and a long term concession period of 38 years has been set for the project. The Navy and Hutchison had first signed an MoU on the terminal last year which at the time had suggested that Hutchison would train more than 1.5k Egyptian engineers and workers to run the port and that it would intake some 1 mn containers each year after the project is completed.

Advisors: Eldib Advocates acted as legal advisors for the Egyptian Navy and Baker McKenzie provided legal advice for Hutchison Ports.

STARTUP WATCH- DigiFi Network raises pre-seed funding from Toronto based Loyal VC: Egyptian data-for-Wifi startup DigiFi Network has raised an undisclosed amount of pre-seed funding from Canadian venture capital firm Loyal VC to expand its operations and user interface, Disrupt Africa reports. The startup enables users to offer personal data from social media accounts to businesses in exchange for free Wifi access at their premises. DigiFi was founded by Ahmed Nassef and Mohamed Maher in 2019 after going through the Founder Institute accelerator program. The duo are reportedly looking to create a regional data hub for targeted digital advertising campaigns with the most recent round of funding.

The private sector will get a piece of the new futures exchange even as gov’t agencies scramble for their share: Last Tuesday’s meeting called by the Financial Regulatory Authority (FRA) saw the EGX, CBE, and Misr for Clearing, Depository and Registry (MCDR) vie for ownership of the futures exchange, sources told Hapi Journal. But amid the haggling, one thing remained constant: no matter which way you cut it, partial private sector ownership of the exchange will be a reality. Three main ownership plans have been put on the table:

Scenario #1: The CBE, MCDR, and the EGX may hold a majority stake of 51% and they would discuss amongst themselves who takes what. The remaining 49% would be distributed among private banks, insurance companies, and funds who would each seek their own share in a private placement. A cap on private ownership of individual entities may be introduced in this scenario.

Scenario #2: 70-80% of the exchange could be owned by the private sector, while the CBE and EGX could own 20-30% minority stake.

Scenario #3: Expand the ownership structure significantly to distribute the stakes in equal parts of 2-3% to each of the public and private sector parties involved.

The government will roll out a “comprehensive system” to support seasonal and day laborers by the end of the year or early 2021, Manpower Minister Mohamed Saafan said, according to a cabinet statement. It’s still unclear what this new system will look like or how long it will run for. The statement, however, hints that the new program could involve some form of welfare payouts, mentioning that authorities have since April disbursed EGP 2.4 bn pf covid-19 financial assistance to some 1.6 mn individuals who don’t have stable jobs. Seasonal workers were each given EGP 1500 over three installments. Saafan said. International Cooperation Minister Rania Al Mashat previously said that the government is working to support 1.5 mn seasonal workers it had identified as vulnerable to the economic fallout from covid-19 to help integrate them within the formal economy.

The Planning Ministry likes what the int’l Egypt-watchers have to say on the EGP, foreign reserves: The Planning Ministry is out with a summary (pdf) of international opinion on the trajectory of the EGP and foreign reserves in the months and years ahead as the economy begins to recover from the covid-19 shock. Despite foreign investors dumping more than half their holdings of EGP bonds amid a record-breaking EM sell-off in March and April, the EGP held up well through the height of the financial panic, losing just 3% of its value between March and June. Reserves took an almost USD 10 bn hit, falling from USD 45.5 bn in Febuary to USD 36 bn in May.

An EGP rebound: Both Capital Economics and the Economist have forecast increased currency stability going forward. Capital Economics notes that the EGP has risen 2% against the greenback since July while the Economist is projecting the currency to rise 6.4% against the USD to EGP 15.74 by 2024. Fitch, meanwhile, said that the EGP has been one of the best performing EM currencies and expects it to remain stable until through the rest of 2020.

But it’s going to take a while for foreign reserves to recover: The IMF is projecting foreign reserves to slowly recover this year, rising to USD 40.1 bn by the end of the current fiscal year, and reaching USD 51 bn by the middle of the decade. The Economist sees the buildup of reserves accelerating in the beginning of 2022 after the tourism, export and services sectors fully recover from the pandemic.

Egypt will deploy army if necessary to handle wildcat builders -El Sisi: President Abdel Fattah El Sisi threatened to use the army to crack down on those who build without permits or flagrantly violate construction codes, Youm7 reports, carrying a video clip of the statement (watch, runtime 27:11). “I will never allow that we give our country [away] this way and waste it," El Sisi said. “If it becomes necessary I will deploy the army to all of Egypt’s villages to enforce the law.” The president made the remarks on the sidelines of an inauguration for several national projects in Alexandria

Foreign press coverage: The National took note of the story, stressing how much the issue appeared to irk the president. It highlighted that El Sisi was “visibly angry” and spoke with a “raised voice, stating that the matter was no less serious than terrorism, or the threat to Nile waters posed by the Grand Ethiopian Renaissance Dam. “I have enough engineering machinery to obliterate and remove [illegal buildings] and if people don’t like that, then they can have a referendum [on his leadership] and I just leave,” it quoted the president as saying.

Background: The government has extended until 15 September a deadline to demonstrate “seriousness” for applicants looking to settle building code violations in an effort to tackle the long-standing issue. The fees would be submitted alongside settlement applications, and deducted from the overall charges if the applications are accepted. Demolition procedures would commence right away for rejected applications.

US may withhold aid to Ethiopia as no progress seems to be made on GERD: US Secretary of State Mike Pompeo has reportedly signed off on plans to cut some USD 130 mn-worth of assistance programs to Ethiopia to pressure the country to reach an agreement with Egypt and Sudan in the Grand Ethiopian Renaissance Dam (GERD), Foreign Policy reported. The move could see a suspension of funding for security, counter-terrorism, and anti-human trafficking, but not aid for humanitarian relief, food, and health, FP said, citing officials and congressional aides familiar with the matter. Bloomberg also had the story.

Friday’s talks failed: News of the potential cut to US aid came after the three countries’ irrigation ministers failed to see eye-to-eye at talks on Friday, an Irrigation Ministry statement. The breakdown prompted Sudan to warn that talks in their current format are unlikely to produce an agreement, the Sudanese News Agency reports.

Greece signs off on maritime demarcation pact with Egypt: The Greek parliament ratified on Thursday the maritime border demarcation agreement the country signed with Egypt earlier this month, Greek City Times reports. The ratification, which follows a sign-off by Egypt’s House of Representatives, came hours after Turkey extended its oil and gas search in the contested waters and announced it will be holding navy drills for two weeks in an area northeast of Cyprus.

Greece is also holding navy drills of its own in the eastern Mediterranean alongside Cyprus, Italy, and France, who have increasingly been at odds with Turkey’s unilateral activities in the area.

The EU could discuss sanctions on Turkey at its next summit on 24 September should efforts to reach a diplomatic solution fail. Measures aimed at containing Turkey’s ability to search for natural gas in contested waters could be under discussion, including a possible decision to restrict Turkish companies’ and individuals’ access to European ports and supplies, reports Reuters. The country’s aggressive push for a share of resources in the gas-rich region has led to a diplomatic spat with the EU, with the bloc backing member states Greece and Cyprus.

The foreign press has widely taken note of the ratification: Reuters | Bloomberg | the Wall Street Journal. The maritime accord, along with a decision last week by Greece to expand territorial waters further west into the Ionian sea, is a message to Ankara that Greece has the right to extend “its territorial waters … when it decides to,” suggest the WSJ piece.

MOVES- Hassan Abdel Shafi Ahmed is the new chief of the Administrative Control Authority (ACA), effective on 30 August, Youm7 reports, citing the spokesman for the presidency, Bassem Rady.

Leading the conversation on Egypt this morning: The arrest of the acting leader of the Muslim Brotherhood, Mahmoud Ezzat, during a raid his hideout in Fifth Settlement. The 76-year-old Ezzat has been on the run for the past seven years and was sentenced death in absentia on terrorism charges. He now faces a mandatory retrial. Picking up the story: The Associated Press | Reuters | New York Times | Arab News. Meanwhile, HRW and the Carnegie Endowment for International Peace are condemning rights activist Bahey Eldin Hassan’s sentencing to 15 years in prison.

From the Culture Desk: AFP takes a look at the plight of Egyptian cinema through the pandemic while Haaretz puts Egypt’s ‘refusal’ to normalize cultural ties with Israel in the spotlight.

GERD and Turkey dominate news on the diplomacy and foreign trade fronts after an eventful weekend. In other news:

New opportunities for citrus exporters, petchem players? Some 600 products will be fully exempt from custom duties starting 1 September under a trade agreement with the four South American Mercosur countries, the Trade and Industry Ministry said. The products include cement, natural gas, citrus fruits, and other petroleum-based products including butane, propane, nitrogen, and glues.

Egypt and Denmark have inked a clean energy agreement: The electricity and international cooperation ministries have signed an agreement with the Danish Ministry of Climate Energy and Utilities to facilitate Egypt’s transition toward clean and renewable energy, a cabinet statement said on Saturday. The agreement aims to boost commercial ties and facilitate knowledge exchange through technical and in-kind assistance. The statement did not provide additional details on projects or timeframe.

The European Bank for Reconstruction and Development (EBRD) said that it is considering providing Acwa Power with USD 54 mn to help build and develop a 200 MW solar power plant in Kom Ombo, according to a statement on Friday. The loan would comprise USD 40 mn in senior debt financing and an equity bridge loan of USD 14 mn. The loan is slated for approval on 30 September. The project would be one of the largest privately-developed solar plant projects in Egypt.

The New and Renewable Energy Authority (NREA) has signed an agreement with Belectric to construct a 50 MW solar power plant in Zafarana, NREA head Mohamed El Khayyat told the local press. The project will be funded by the German Development Bank (KfW) but details on the total cost of the facility remained unspecified. The Zafarana plant is expected to generate 90 mn KWh of electricity annually.

The Bashayer El Kheir 2 housing project, the new Borg El Arab sewage treatment facility, the Mahmoudia highway development project and a number of oil and gas projects have been completed in Alexandria, President Abdel Fattah El Sisi said yesterday at the inauguration ceremony, according to a statement by Ittihadiya spokesperson Bassam Rady.

Egypt is targeting the production of 15.6 tonnes of gold in the current fiscal year, the local press reports, citing unnamed government sources.

The Egyptian Drug Authority is looking to provide a set of incentives to contract manufacturing for export markets, said Egyptian Drug Authority spokesperson Aly El Ghamrawy according to a cabinet statement. The authority is planning to set a temporary approval mechanism for contract manufacturing that bypasses the requirement for local manufacturers to register products with the authority for domestic sale.

Hyper One supermarket has opened a new 50k sqm location in New Sphinx City on the Cairo-Alexandria desert road, Mohamed El-Hawari, chairman of the retail chain group, told Hapi Journal. Construction cost the company some EGP 650 mn.

The ICT Ministry launched on Thursday the beta version of its digitized government services portal, according to a ministry statement. The new online platform (digital.gov.eg) allows users to create a personal account by registering a national ID and mobile phone number that would enable access to 70 government services including driver’s license renewal, subsidy card access, official document requests and notary services. The platform will also be accepting service payments through e-payment companies on the new platform and a mobile application will be launched in the coming weeks before the full launch of the digitized platform will be made available by the end of the year.

Our friends at CIB will be leading a consortium to arrange a EGP 1.1 bn syndicated loan for Madinet Nasr Housing and Development (MNHD), MNHD said in a regulatory filing. The Arab Investment Bank, the Egyptian Gulf Bank, and the Union National Bank are also participating in the seven-year facility. The loan’s proceeds will help MNHD push forward with plans to invest EGP 12 bn over the next three years in its Sarai and Taj City compounds.

The New Cairo Misdemeanor Court upheld on Thursday a suspended one-year prison sentence for former head of the Central Auditing Organisation (CAO), Hisham Geneina, and fined him EGP 20k on charges of spreading false information, Al Masry Al Youm reports. Charges against Geniena were brought to court in 2016 after he had alleged government corruption had cost taxpayers some EGP 600 bn between 2012 and 2015. Geneina is currently serving a separate five-year sentence handed to him in 2018 by a military court on charges of spreading false news related to the armed forces and domestic affairs.

Lebanon has arrested three suspects allegedly involved in the [redacted] assault of an 18-year-old woman at the Fairmont hotel in Cairo in 2014, according to a statement by the country’s Internal Security Forces. Five of the suspects arrived in Lebanon, but the other two left the country, it added. Seven suspects in the case fled Egypt last month, while another two were detained in Cairo.

Black Panther star Chad Boseman died of colon cancer on Friday at age 43 after choosing to keep his four-year battle with the disease out of the press while filming the beloved Marvel movie and bringing King T’Challa to life, according to the Associated Press. Black Panther was celebrated for marking a milestone in cinema with a predominantly black cast and an African American director while Boseman was always vocal about race issues in the industry during his acting career.