Wednesday, 30 September 2020

Investors snap up Egypt’s maiden USD 750 mn green bond issuance

TL;DR

What We’re Tracking Today

Good morning, wonderful people. A quick programming note to get us underway this morning:

We’re delighted to announce that Making It, our podcast on how to build a great business in Egypt, is back for season number three. Episode one debuts on Thursday, 8 October — just in time for the long weekend, with new episodes each week thereafter. Making It is brought to you in association with our friends at CIB and USAID.

As you might figure, covid-19 plays heavily in this season, starting with the fact that most of our guests joined us remotely instead of in our studio. Guests this season do everything from food and fintech to retail, healthcare and professional services — so no matter what business you’re running (or might want to start), we have someone for you.

Tap or click here to listen to this season’s trailer on our website | Apple Podcasts | Google Podcasts.

Want to catch up on episodes you missed from past seasons? They’re all on our website, or you could just start with:

Catch up on past episodes and listen to the next season here: Our Website | Apple Podcasts | Google Podcasts


As of today you are no longer able to send cash and cheques through the mail after the National Post Authority yesterday announced tough new anti-money laundering measures, El Watan reports.

EFG Hermes’ virtual investor conference wraps up tomorrow. You can visit the conference website here.

The election authority is out with a video explaining how Egyptians abroad can vote by mail in the upcoming House elections (watch, runtime: 4:51). Expats have until 10 October to register to vote, with polling taking place in waves from starting 21 October through 6 November. Step one: You’ll need to visit the National Election Authority’s website to register. Check out our calendar at the end of today’s web edition for a rundown on which governorates vote when.

The House of Representatives will reconvene for the sixth and final legislative session on 1 October.

Key news triggers as we enter a new month tomorrow:

  • PMI figures for September are due out for Egypt, Saudi Arabia, and the UAE next Monday, 5 October.
  • Foreign reserve figures for September should be out next week.
  • Inflation data for September will land on Saturday, 10 October (the next central bank meeting isn’t until mid-November).

The Health Ministry reported 124 new covid-19 infections yesterday, up from 115 the day before. Egypt has now disclosed a total of 103,079 confirmed cases of covid-19. The ministry also reported 13 new deaths, bringing the country’s total death toll to 5,914. We now have a total of 96,094 confirmed cases that have fully recovered.

The Education Ministry has published its guidelines for how the new academic year will be structured at all schools it regulates, including how many days each week grades will be required to attend the school, Masrawy reports. Students attending schools that are able to abide by social distancing requirements will be able to attend classes full time. For schools that can’t: Grades from the fourth primary (ibtidaiyah) grade to the third preparatory (eidadiyah) will be required to attend the school a minimum of two days a week, while grades from kindergarten to third primary will be required to attend no less than four days a week. Schools will also operate on a two-shift system if necessary to maintain social distancing that keeps students at least one meter apart in classrooms.

enterprise

Data-mining firm Palantir Technologies and software company Asana will make their market debuts today via direct listings, the Wall Street Journal reports. The NYSE has set reference prices at USD 7.25 a share for Palantir (valued at almost USD 22 bn) and USD 21 a share for Asana (valued at around USD 5 bn).

SOUND SMART- What’s a direct listing? Direct listings circumvent investment-banking underwriters, giving existing shareholders including employees and early investors the chance to sell shares on the first day of trading. No new equity is offered in a direct listing.

US stocks stumbled in trading yesterday as the S&P 500 slumped 0.5% after little progress was reached in high-stakes stimulus talks in Washington and investors fretted over the pandemic, Bloomberg says. The Dow also finished 0.4% and the Nasdaq slipped 0.3%.

Banks and bond traders are sending conflicting signals on the health of the US economy: Investors are continuing to pile into bonds at the same time as banks put aside USD bns in loan loss provisions, breaking with a long-term trend that has seen both banks and bond traders make similar assessments on credit risk, the Financial Times reports. Market watchers say that the Federal Reserve’s support for the corporate bond market and ultra-low interest rates have “scrambled the signals transmitted by yields on corporate debt.”

The world’s largest oil traders are investing USD bns in renewable energy projects over the next five years in anticipation of a fundamental shift in the world’s energy mix, the Financial Times report. Swiss commodity trader Mercuria is planning to sink USD 1.5 bn into projects in North America, while Geneva-based Gunvor is planning to redirect 10% of the company’s equity —USD mns — over the next two years. The investments underscore how trading houses heavily engaged in the oil market now want to play a bigger role in solar, wind and hydrogen over the next decade.

30% Google tax? Google will strictly enforce its policy of taking a 30% cut of payments made within apps offered by the Google Play store, CNBC reports. Some developers like Netflix and Spotify have been circumventing the requirement by prompting users for a credit card to pay them directly, which Google says it will no longer allow. The fee is much like the 30% commission Apple charges vendors on its platform, which some developers have recently claimed violates antitrust rules.

enterprise

The Emir of Kuwait Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah has passed away at the age of 91, the royal court announced yesterday. Al Sabah died in the US where he had been in hospital since July after having surgery in Kuwait. He will be succeeded by Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah, CNN Arabic reports, carrying a profile of the 83-year-old crown prince.

President Abdel Fattah El Sisi expressed his condolences on his official Facebook page, saying the Arab and Muslim world had lost “one of its most precious men.” El Sisi announced three days of mourning starting Tuesday 29 September to mark the occasion, an Ittihadiya statement said.


US ELECTION WATCH- For anyone wanting policy substance, US presidential debates are the wrong places to look. Joe Biden called Donald Trump a “clown” and “the worst president America has ever had.” Trump ramped up the superlative-laden rants and interrupted Biden at any given opportunity. Fox News moderator Chris Wallace pleaded for order as both candidates shouted over each other. “That was the worst debate I’ve ever seen,” George Stephanopoulos said when the circus wrapped. We’re giving this one to Biden, purely on the basis he was able to form a cogent sentence.

enterprise

*** 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: After we looked last week at why Egypt loses so much of its water, we turn this week to what the government needs to do to fix the problem.

Enterprise+: Last Night’s Talk Shows

The death of the Emir of Kuwait, Sheikh Sabah Al Ahmad Al Jaber Al Sabah, at the age of 91 dominated the airwaves last night. Talk shows highlighted President Abdel Fattah El Sisi’s social media post mourning the death of Al Sabah, and the declaration of three days of mourning. Al Hayah Al Youm’s Mohamed Sherdy (watch, runtime: 1:04), Masaa DMC’s Ramy Radwan (watch, runtime: 0:36), and Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 2:31) all had coverage. Yahduth Fi Misr’s Sherif Amer spoke to Kuwait’s ambassador in Cairo, Muhammad Saleh Al Thuwaikh, to offer his condolences (watch, runtime: 3:53).

The parliamentary elections are definitely not cancelled: Radwan covered the statement from Lasheen Ibrahim, the head of the National Election Authority, who denied claims circulating on social media that the Administrative Court had suspended next month’s parliamentary elections (watch, runtime: 4:35).

Looking ahead to the new academic year: Radwan spoke with Hossam Abd El Ghafar, the spokesperson for the Higher Education Ministry, who said that new national universities will reopen admissions from 1-3 October for students who weren’t able to pay tuition fees online due to technical problems. El Ghafar noted that a second round of electronic admission tests will be held on 4-5 October (watch, runtime: 8:16).

Red Sea tourism rebounds, if modestly: Moussa spoke by phone with the Red Sea Governor Amr Hanafi, who said that the number of tourists from Europe constituted about 20% of all tourists, and were mostly from Croatia, Serbia and the Netherlands. He said that the figure was reasonable given the circumstances of the pandemic, and said he looked forward to the return of German and Russian tourists. He stressed that the governorate has not seen any new covid-19 cases recently, and had become adept at administering PCR tests. Hanafi also touched on the latest reconciliations of building code violations in the governorate, saying some 25% of applicants had paid the settlement fees (watch, runtime: 21:09).

The electronic invoice: Osama Kamal interviewed Mahmoud Saqr the head of the Central Administration for Tax Authority Office Affairs, and Said Fouad, advisor to the head of the Tax Authority, about the new electronic invoicing system currently being trialled by the authority. Saqr said that six companies have been piloting the system since June, and will on-board 134 companies in mid-November. The companies are currently only issuing invoices business-to-business but the authority plans to expand the system to include business-to-consumer at a later stage (watch, runtime: 44:06).

New cities prepare water infrastructure for the winter: Radwan phoned Gamal Talaat, assistant to the deputy head of the New Urban Communities Authority, who said that the authority is clearing drainage networks, increasing the water collection points, and testing sanitation pumps ahead of the winter season. Talaat added that they increased the diameters of the sewage pipes, and strengthened and duplicated the existing lines. Radwan also called Sherif El Sherbiny, head of the Sixth of October City Authority, who said that they ran regular maintenance checks on the sewage networks to make sure they’re in proper condition (watch, runtime: 19:39).

Speed Round

Egypt sold USD 750 mn in green bonds yesterday in what was the region’s first sovereign offering of the climate-friendly securities, Bloomberg reports. The issuance was almost 5x oversubscribed, attracting some USD 3.7 bn worth of orders for the bonds, pointing to growing appetites for climate-friendly securities worldwide. The government had been expected to sell USD 500 mn of the bonds.

About the offering: The sale consists five-year notes, which were initially taken to market at a yield of 5.75% but were sold 50 bps lower at 5.25%, Reuters suggests. The bonds will finance the development of Egypt’s USD 1.9 bn portfolio of green projects, including clean transportation, renewable energy and sustainable water management, the report noted.

The offering attracted new investors, with a virtual roadshow “attended by many who are speaking to Egypt for the first time,” Reuters reports, citing an unnamed source familiar with the transaction. Sustainability analysts and global investors were among those interested in the sale., said that while the bonds offer value “when compared to the existing secondary Egyptian curve … I think they might tighten,” Zeina Rizk, Arqaam Capital’s executive fixed income director, said as the bonds were being marketed. Recent market weakness over fears of a second covid-19 wave and “market indigestion” from the large number of new issuance could make investors more selective, she said.

Advisors: Credit Agricole, HSBC, Citibank, and Deutsche Bank were tapped earlier this year to manage and market the offering.

Background: Egypt’s first sovereign green bond sale comes as part of the government’s debt diversification strategy, which entails a shift towards longer-term debt, which the government hopes will constitute some 52% of borrowing by June 2022. CIB is expected to follow suit and issue Egypt’s first corporate green bond next month.

DEBT WATCH- Two corporate sukuk offerings worth a combined EGP 4.5 bn are expected to go to market this year, including Sarwa Capital’s planned EGP 2.5 bn issuance and another EGP 2 bn sale from an unnamed company in the services industry, head of the Financial Regulatory Authority’s Central Administration for Finance Sayed Abdel Fadil told Al Mal. Sarwa’s single-tranche issuance — which will be the second corporate issuance of the sharia-compliant bonds to hit the Egyptian market since the FRA published regulations for the bonds last year — is expected to go to market by the end of October, said Abdel Fadil. He did not clarify a timeline for the unnamed company’s planned issuance, but said it is still in its early stages.

About Sarwa’s issuance: The sukuk, which were originally to hit the market mid-September, carry a seven-year tenor, maturing in 2027, and will be the second sukuk issuance to hit the Egyptian market after Talaat Moustafa Group’s (TMG) offering earlier this year. Sarwa tapped ALC Alieldean Weshahi & Partners as legal counsel and KPMG Hazem Hassan as financial auditor for the issuance. Middle East Ratings and Investor Services (MERIS) will issue a rating on the offering.

Who else is offering sukuk? Another EGP 2 bn issuance by Amer Group is also in the works (though its timing has yet to be announced) while a planned USD 50 mn issuance by aviation leasing company CIAF was pushed indefinitely because of covid-19, but could see the light in 1Q2021. The Egyptian Petrochemicals Holding Company was also reportedly planning an EGP 1 bn sukuk issuance — the first by a state-owned company — though this has not materialized as of yet. TMG was the first to issue EGP 2 bn in sukuk in April 2020, in an offering that was 2.5x oversubscribed. The sukuk were listed on the EGX earlier this month as part of TMG’s three-year EGP 4.5-5 bn sukuk program intended to finance the real estate company’s leasing projects.

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DEBT WATCH- More EBRD funds in the pipeline for Abu Qir metro conversion project? The European Bank for Reconstruction and Development (EBRD) has received a formal loan request from the government for EUR 250 mn to partially fund a project to convert Alexandria’s Abu Qir railway into an underground metro, Deputy Regional Director Khaled Hamza tells Al Mal. The bank is expected to look into the request sometime next year, he said, without providing further information. The European Investment Bank has already agreed to provide EUR 750 mn to help finance the project, which is expected to cost EUR 1.5 bn in total.

EBRD has invested EUR 1.36 bn in Egypt so far in 2020, Hamza told the newspaper. The investments include EUR 657 mn that were channeled to different industries and EUR 350 mn for trade finance, Hamza said, without giving details on the remaining amount. Overall, the bank supported 13 projects through direct funding, credit lines for on-lending, or trade finance activities by five local banks — CIB, Banque Misr, the National Bank of Egypt, QNB, and NBK Egypt, he added. Those five banks received at least USD 100 mn each, with the EBRD in talks with two unnamed banks for an additional USD 100-200 mn for on-lending to SMEs before the end of the year. According to Hamza, the amount channeled through banks came as part of the EBRD’s covid-19 global solidarity package, which we laid out in our recent sit-down with EBRD managing director for the SEMED Heike Harmgart.

Social spending programs in the Middle East and Central Asia are still lagging behind the EM average, despite making “notable progress in recent decades,” which is undermining the region’s human development outcomes, according to an IMF report (pdf). While emerging markets spend an average of 14% of GDP on social support programs, Middle Eastern and Central Asian governments earmark only 10.4% of GDP for the same purpose. This disparity is more concerning when looking at the outcomes from these spending initiatives; it appears that emerging markets are not only spending more, but that their spending has greater efficiency. “Increasing the efficiency of spending in the region to the global frontier could — without any increase in outlays — eliminate one-third of the [human development index] gap,” the report says.

Egypt is among the countries that got props for shoring up its social safety net before the pandemic broke out. While the report does not dive into the details of Egypt’s social spending outlays (and specifically excludes subsidies from its calculations) the Sisi administration has been prioritizing social spending and rolling out programs, such as the Takaful and Karama cash subsidy program — which was introduced in 2015. The report also gives Egypt, Pakistan, and Mauritania brownie points for introducing financial support targeting vulnerable women, saying that continued support for vulnerable groups must be a key priority for governments’ covid-19 response packages.

Egypt’s FY2020-2021 budget shows state spending rising 9% y-o-y, with increases of up to 70% on essential services like education and low income housing. The constitution already requires the country’s budget to have 7% of GDP allocated on education and 3% on healthcare so maybe “boosting the efficiency of spending,” as the report suggests, could help bolster the efficacy of their outcomes.

Palm Hills Developments (PHD) and CI Capital’s Taaleem have set up a joint venture to develop their planned EGP 1.6-1.9 bn life sciences university in PHD’s Badya compound, according to a press release (pdf). The two companies signed yesterday a shareholder agreement for the JV, of which Taaleem will own 60% and PHD holding the remaining 40%. The two companies signed an MoU in June for the university, which will span 100k sqm and accommodate up to 9k students. It will be established in partnership with Medical University of Vienna International and is expected to open its doors in 2022.

Background: CI Capital is a minority shareholder with a 16.4% stake in Taaleem, which owns the Nahda University in Beni Suef, the largest private university in Upper Egypt. The Badya compound is a 3k-feddan West Cairo project under development by PHD in partnership with the New Urban Communities Authority.

M&A WATCH- HeidelbergCement looks to acquire 100% of subsidiary Suez Cement: Suez Cement’s German parent company HeidelbergCement has submitted a mandatory tender offer to the Financial Regulatory Authority (FRA) for the remaining 33% stake it doesn’t already own in the company, according to a regulatory filing. The MTO is for nearly 59.8 mn shares at EGP 7.50 apiece, giving the transaction an initial value of more than EGP 448 mn.

Suez Cement, in turn, is looking to snap up a 28% stake in subsidiary Tourah Portland Cement Company (Tourah Cement). The company launched a separate MTO for more than 20 mn shares at EGP 7.18 apiece, valuing the stake at more than EGP 144 mn, the company said in a disclosure. Suez Cement currently holds a 66.2% stake in Tourah Cement. There were no details on the reason for Heidelberg’s MTO for Suez. Suez said in a filing to the EGX (pdf) that Heidelberg was advised by local representatives to have Suez lodge a separate MTO for Tourah in a bid to protect shareholders, and avoid any regulatory hangups caused by the first MTO. HeidelbergCement subsidiary Ciments Francais holds direct and indirect stakes in Tourah of up to 55%.

The cement industry in Egypt has been suffering for years from a drawn out supply glut that has seen producers lose bns. Lafarge Egypt's CEO Solomon Baumgartner Aviles said last month that as many as six players could be forced to exit the market by 2021. Tourah Cement is one candidate: the company has already suspended operations, and is currently struggling to turn a profit. Suez Cement’s losses have also been widening in recent quarters, with sales struggling to pick up.

Security authorities in Alexandria are imposing fees on transporting hazardous materials out of the city’s main port, according to a letter from the security directorate to shippers picked up by Al Mal. Shipments containing explosive substances or chemicals classified as dangerous will incur “transportation safety” fees of EGP 100-110 for each km traveled. Alexandria International Container Terminals earlier this month doubled fees it charges for handling containers carrying hazardous goods inside the port. The new safety guidelines come after August’s Beirut port blast which has seemingly prompted authorities to take additional preventative measures.

STARTUP WATCH- Ride-hailing app Swvl is looking to expand to the Gulf in the coming months, General Manager Omar Selim told Al Mal, without specifying which countries the company is targeting. According to Selim, the company prefers to operate in emerging markets with market demographics that are similar to Egypt’s, including population size and traffic congestion. Swvl said last year it plans to launch in the Philippines, Indonesia, and Bangladesh by the end of 2020. The company already operates in Kenya, Nigeria, and Pakistan.

EARNINGS WATCH- Cleopatra Hospitals Group (CHG) is on track to record 15% y-o-y revenue growth in 3Q2020, with an expected q-o-q increase of 50%, according to a trading update (pdf) citing unaudited figures. The group expects to see its revenue grow 7% y-o-y in 9M2020. The anticipated uptick in CHG’s topline is supported by recovering patient volumes across the group’s different services caused by the lifting of coronavirus restrictions, the transformation of El Katib and Queens hospitals into covid-19 treatment facilities, and the introduction of a number of digital and at-home medical services for those unable to visit CHG’s hospitals.

The company has taken several steps in 3Q2020 to grow its business operations, “signing multiple new agreements to expand its service offering and penetrate into new, fast-growing segments of the healthcare industry.” These include the creation of a joint venture with Bedaya for Medical Services fertility center (60% owned by CHG), the creation of the Egyptian Healthcare Facilities Services joint venture (49% owned by CHG), and the renovation of Nile Badrawi Hospital’s 10th and 11th floors.

MOVES- Sherif Elbehery (Linkedin) has been tapped as managing director of Misr Digital Innovation Company, Banque Misr’s digital banking arm, the bank’s deputy chairman Akef El Maghraby told Hapi Journal. Elbehery was previously the bank’s head of SMEs, microfinance and Islamic banking — a position that will now be filled by Mohamed Antably (Linkedin). Antably was most recently Attijariwafa Bank Egypt’s director of SMEs and business banking. El Maghraby will be chairman of the digital banking arm.

Egypt in the News

It’s a ghost town in the foreign press this morning.

Diplomacy + Foreign Trade

On the diplomatic front this morning: President Abdel Fattah El Sisi discussed efforts to resolve the conflict in Libya with UK Prime Minister Boris Johnson, an Ittihadiya statement said yesterday. Johnson expressed support for Egypt’s efforts to bring about a ceasefire and committed to work in tandem with the Egyptian government going forward. They also discussed the latest developments on the Palestinian issue and the talks on the Grand Ethiopian Renaissance Dam.

Efforts to alleviate the debt burden of developing countries in light of the pandemic received an endorsement from Prime Minister Madbouly during a UN meeting this week, the local press reports. The international community should work together to ease credit terms from international lenders and ensure funds are provided to the hardest-hit countries, Madbouly said. He also came out in support of efforts to reduce the cost of transferring remittances from workers abroad.

hardhat

What the state needs to do to plug leaks in our water network: It is estimated that Egypt lost around 29% of its 10.7 bn cubic meters (bcm) of drinking water supply (or 3.1 bcm) in FY2018-19 to an aging network of pipelines and illegal construction, officials and experts we spoke with last week told us. The waters get murkier when we look at agriculture, where we could be losing bns of cubic meters to canal leakages and outdated agricultural techniques (an issue we plan to explore in further detail in the coming weeks), officials tell us.

The obstacles to upgrading the aging water network: While the state is working on a USD 50 bn plan to combat water scarcity, it is also working towards maintaining and upgrading existing water grids, while also ensuring future water grids do not suffer the same fate. Contractors and officials we’ve spoken with tell us that the main challenges facing this project are the amount of funding needed, the lack of contractors participating in the upgrades, and the entanglement of various water authorities. Today, we explore how each of these challenges is slowing down the upgrade of our water grids.

The funding problem: Cairo alone ate up EGP 5.5 bn over the last five years to improve water grid infrastructure, Cairo Wastewater Company Chairman Adel Hassan told Enterprise. The cost of extending new pipelines amounts to EGP 2k – 20k per cubic meter of pipelines, depending on the technology used, he said.

This pushed the government to launch a 10-year plan to spend EGP 312 bn in extending and replacing outdated water pipelines around the country, including EGP 10 bn this year, according to Khaled Siddik, executive director of the Housing Ministry fund for developing informal settlements.

But periodic allocations for the plan have not been cutting it: The government has only been allocating a fraction of the total funding needed, Giza Water Company Chairman Mansour Badawi said. His company required EGP 250 mn in FY2020-2021 to maintain the pipeline network but was only granted EGP 27 mn. The company is also still waiting for the Holding Company for Water and Wastewater (HCWW) to approve a EGP 5 bn plan to extend wastewater networks and build a new water pipeline.

Funds raised by building code settlements is part of the solution: The state has been strict on clamping down on building code violations over the past few months, forcing violators to apply to pay settlements by 31 October. As a major contributor to the leakage in our water grids, the ministry is looking to use some of these settlements to fund upgrades to the network. Under Article 8 of the recently-amended building codes (pdf), 39% of total settlements will be used to fund water and wastewater networks.

Relying on the alphabet soup of development agencies and finance institutions: The government has been relying heavily on loan agreements from international donors, Hassan told us. A quick look at the HCWW’s website shows a host of projects, including various water grid maintenance projects, that are receiving funding from multilateral institutions, including the African Development Bank, the French Development Agency, the European Investment Bank and the World Bank. This strategy looks set to continue. An EU-based development partner is currently studying a two-tranche EGP 6 bn loan to improve the water grid in Egypt, he added, without disclosing the institution.

Green bonds, sukuks: The government is working on a new funding strategy to guide its sustainability and green economy strategy, which includes water maintenance. Under this framework, the government is looking to use newly-legislated instruments such as sukuk and green bonds. Egypt currently has a portfolio of USD 1.9 bn of green projects in the pipeline, including sustainable water management systems, Finance Minister Mohamed Maait said ahead of Egypt’s first sovereign green bond issuance, which went to market yesterday.

Why private sector contractors aren’t buying into water network maintenance: Contractors don’t have much of an incentive to participate in upgrading water grids, as the margins on these projects are too low. Instead, larger, more experienced contractors tend to focus their efforts on building water treatment or desalination plants on build-own-operate or public-private partnership frameworks to turn higher profits, Siddik told Enterprise. Most of the problems that need fixing are in residential neighborhoods so maintenance and expansion are often time consuming and not as lucrative as other projects. Major construction companies therefore avoid, as much as possible, employing their machinery and staff in small infrastructure projects, a source at the Arab Contractors told Enterprise. “We would not mobilize expensive equipment and highly paid engineers to fix a small leakage in a small village. Those are usually smaller companies," an official at another larger construction company tells us.

However, leaving the maintenance of the infrastructure to smaller contractors comes at the expense of quality. Smaller contractors who opt in to extend infrastructure have often been faced with delayed payments and resorted to lower the specifications of the projects to make more profit, head of the Egyptian Federation of Construction Contractors Mohamed Sami told Enterprise.

And red tape isn’t helping matters: The water and wastewater sector is subject to the jurisdiction of four different agencies: the Construction Authority for Potable Water and Waste projects and the Egyptian Water Regulatory Agency (EWRA) both supervise construction, while the HCWW and regional water companies follow up on the quality, Housing Ministry advisor Tarek Refaey told Enterprise. The overlap in jurisdictions between different entities has been a major headache for contractors, Sami said, explaining that contractors signed agreements with the regional water distribution companies but it was the HCWW that signed off on the delivery and both companies relied on different specifications.

The hope is that legislation, quality measures, and expedited payments will solve both problems: To solve this entanglement, the government prepared amendments to the Drinking Water and Wastewater Act, which would essentially set the regulatory framework for the sector while giving EWRA control over those involved in water production and distribution, allowing it to specify which projects the private sector can work on. To solve the quality control problem with smaller contractors, contracts on new projects now include stipulations requiring contractors to pay 1% of the cost of the project to professional quality control consultants to review all details and specifications before receiving the sign-off of the HCWW, Siddik said. Meanwhile, the government has recently expedited the payment of contractors to ensure they can deliver their projects on time and at higher quality, Sami noted.

But, as we noted in our dive into water legislation, these have been bogged down in the House of Representatives. Little progress has been made in the House on passing the Drinking Water and Wastewater Act, along with the Water Resource Act — which legislates the proper use of Egypt’s water resources .

Until the two acts are passed, the government’s only tool is to implement efficient means of consumption by relying more on smart meters to better calculate consumption and step up collection rates, HCWW chairman Mamdouh Raslan tells us. He noted that waste has declined in the past two years from 30% to 28% after strengthening supervision and focusing on replacing pipelines over 40 years of age.

Your top infrastructure stories for the week include:

  • Egyptian Refining Company’s USD 4.3 bn Mostorod petrochemical refinery — the largest private sector project of its kind in Africa — was inaugurated this week.
  • The deadline to settle with the government for illegal construction has been pushed to 31 October and buildings that are up to code will be issued unique IDs by the end of 2021.
  • Egypt’s construction ban is now partially relaxed, with contractors and real estate developers permitted to resume construction on buildings that are no higher than four storeys.
  • Cement players are calling for government intervention to save the industry from collapse amid a shortfall in demand.
  • Factories might be getting the real estate tax break they have been pushing for if the Madbouly Cabinet accepts a proposal being drafted by the Trade Ministry.
  • Regulations on the licensing and pricing framework for electric vehicles are currently under review by cabinet.

The Market Yesterday

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EGP / USD CBE market average: Buy 15.70 | Sell 15.80
EGP / USD at CIB: Buy 15.71 | Sell 15.81
EGP / USD at NBE: Buy 15.70 | Sell 15.80

EGX30 (Tuesday): 10,987 (+0.2%)
Turnover: EGP 1.5 bn (33% above the 90-day average)
EGX 30 year-to-date: -21.3%

THE MARKET ON TUESDAY: The EGX30 ended Tuesday’s session up 0.2%. CIB, the index’s heaviest constituent, ended down 0.3%. EGX30’s top performing constituents were EFG Hermes up 3.4%, Madinet Nasr Housing up 2.3%, and Elsewedy Electric up 2.2%. Yesterday’s worst performing stocks were Dice down 2.1%, Qalaa Holdings down 2.0% and Egyptian Resorts down 1.7%. The market turnover was EGP 1.5 bn, and foreign investors were the sole net sellers.

Foreigners: Net short | EGP -39.0 mn
Regional: Net long | EGP +8.3 mn
Domestic: Net long | EGP +30.6 mn

Retail: 65.4% of total trades | 65.3% of buyers | 65.4% of sellers
Institutions: 34.6% of total trades | 34.7% of buyers | 34.6% of sellers

WTI: USD 39.17 (-3.52%)
Brent: USD 40.90 (-3.61%)

Natural Gas: (Nymex, futures prices) USD 2.51 MMBtu, (-10.38%, November 2020 contract)
Gold: USD 1,903.10 / troy ounce (+1.11%)

TASI: 8,284 (-0.60%) (YTD: -1.25%)
ADX: 4,494 (+0.06%) (YTD: -11.45%)
DFM: 2,252 (-0.38%) (YTD: -18.52%)
KSE Premier Market: 6,020 (-2.19%)
QE: 9,910 (+0.27%) (YTD: -4.94%)
MSM: 3,614 (-0.19%) (YTD: -9.21%)
BB: 1,430 (-1.26%) (YTD: -11.14%)

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Calendar

September: The Egyptian Federation for Securities will hold elections for its board of directors after they were postponed in March due to the lockdown.

September: The General Authority for Investment (GAFI) will host a virtual meeting with the Arab-German Chamber of Commerce and Industry and some 120 German companies to discuss investment prospects in Egypt.

21 September-1 October (Monday-Thursday): EFG Hermes’ second Virtual Investors Conference.

28 September-3 October (Monday-Saturday): CIB PSA World Tour Finals, The Park, Mall of Arabia, Egypt.

End of September: Last chance to settle building code violations for illegal buildings.

October: Trade and Industry Ministry allocates SMEs seven industrial complexes.

1 October (Thursday): House of Representatives reconvenes for its sixth and final legislative session before elections for the house later in October or November.

1 October (Thursday): Deadline for students to transfer between schools.

1-10 October (Thursday-Saturday): Alexandria Book Fair, Kouta, Alexandria.

4 October (Sunday): Senate convenes for its first session.

5 October (Monday): Libyan peace talks in Hurghada bringing together political figures and tribal representatives from the Libyan National Army (LNA) and Government of National Accord (GNA).

6 October (Tuesday): Armed Forces Day.

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

12 October (Monday): The Egyptian Iron and Steel company general assembly would discuss demerging its mining and quarrying unit and restructure the company’s board of directors

10-17 October (Saturday-Saturday): CIB Egyptian Squash Open, New Giza Sporting Club / Pyramids of Giza.

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

18-22 October (Sunday-Thursday): The annual Cairo Water Week event — which will be semi- virtual this year — will be held under the slogan “Water Security for Peace and Development in Arid Regions”

21-23 October (Wednesday-Friday): Polls open to international voters for first round of Parliamentary elections in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

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

24-25 October (Saturday – Sunday) Polls open for first round of Parliamentary elections in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

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.

November: An Egyptian-Russian ministerial committee will meet to discuss trade and investment in Moscow.

2 November: Former Civil Aviation Minister Ahmed Shafik faces retrial at Cairo Court of Appeals in the so-called Aviation Ministry corruption case.

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

4-6 November (Wednesday-Friday): Polls open to international voters for first round of Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

4-7 November (Wednesday-Saturday): Cityscape Egypt Expo, International Exhibition Center, Cairo

7-8 November (Saturday-Sunday): Polls open for first round of Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

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

15 November (Sunday): Egyptian Tax Authority’s online intro seminar on new electronic invoice system for first tranche of companies transitioning to e-filing program.

19-28 November (Thursday-Sunday): Cairo International Film Festival, Cairo Opera House, Egypt.

23-24 November (Monday-Tuesday): Reruns for Parliamentary elections in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

30 November (Monday): Final results will be announced for Parliamentary elections held in Giza, Fayoum, Beni Suef, Minya, Assiut, New Valley, Sohag, Qena, Luxor, Aswan, Red Sea, Alexandria, Beheira, Matrouh.

December: The 110th regular session of the Egyptian-Iraqi Joint Higher Committee will be held under the chairmanship of the prime ministers of the two countries.

December: IMF delegation visits Egypt to in first of two reviews ahead of disbursement of second tranche of USD 5.2 bn SBA.

1 December (Tuesday): The IMF will conduct a first review of targets set under the USD 5.2 bn standby loan approved in June (proposed date).

7-8 December (Monday-Tuesday): Reruns for Parliamentary elections in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

9-10 December (Wednesday-Thursday): BiznEx, the international business expo in Egypt, venue TBD.

14 December (Monday): Final results will be announced for Parliamentary elections held in Cairo, Qalyubia, Menofia, Gharbia, Kafr El Sheikh, Sharqia, Damietta, Port Said, Ismailia, Suez, North Sinai and South Sinai.

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.

13-31 January (Wednesday-Sunday): Egypt will host the 2021 Men’s Handball World Championship at the Giza Pyramids

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

26-28 January (Tuesday-Thursday): Future Investment Initiative, Riyadh, Saudi Arabia

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.

6-18 February (Saturday-Thursday): Mid-year school break.

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 2021 (Monday): Sham El Nessim.

6 May 2021 (Thursday): National holiday in observance of Sham El Nessim.

12-15 May 2021 (Wednesday-Saturday): Eid El Fitr (TBC).

31 May-2 June 2021 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, Nasr City, Cairo.

1 June 2021 (Tuesday): The IMF will conduct a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

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

24 June 2021 (Thursday): End of the 2020-2021 academic year.

26-29 June 2021 (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center

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

30 July-3 August 2021 (Thursday-Monday): Eid Al Adha, national holiday (TBC).

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