EnterpriseAM — FinMin plans spending boost next FY on higher tax revenues

Good morning, everyone, and happy hump day. We have another busy news day for you as the inexorable march toward Ramadan begins — we’re seven days out, as of this morning.

Regulators will meet today to discuss potentially introducing restrictions on margin trading, said Rania Yacoub, a member of the Financial Regulatory Authority’s (FRA) advisory committee. Representatives from the EGX and clearinghouse MCDR are expected to discuss proposals including a limit on the volume of margin trades allowed for each security, investor, and for the market as a whole after brokerages and custodians recently called for controls to mitigate the risk of the growing appetite for trading on margin.

Mixed messages? A handful of brokerage houses call on the regulator last week to impose limits on margin trading. The news came just a week after the central bank earmarked EGP 1 bn for an FRA-regulated fund that would, among other things, give finance to brokerages so they could expand their capacity to support margin trading.

SOUND SMART- What’s margin trading, you ask? Effectively, it’s when a broker loans you money to allow you to buy more stocks, generally with a stop-loss order that allows them to sell the shares (whether you want to or not) if your losses hit a predetermined threshold. A “margin call” is when your broker tells you she isn’t comfortable with the amount of cash in your account and tells you that you need to deposit more money (or stocks you fully own) into the account or sell down your position to even things out.

***CATCH UP QUICK with the top stories from yesterday’s edition of EnterprisePM:

• Two or three state-owned companies will sell shares on the EGX in 3Q2021, Public Enterprises Minister Hisham Tawfik said.
• Business activity in Egypt’s non-oil private sector contracted for the fourth month running in March, according to PMI figures released yesterday.
• Sawari Ventures has reached the final close on its EGP 1.1 bn Egypt-focused tech platform after raising USD 28 mn from local and regional institutional players.

THE BIG STORY INTERNATIONALLY- US Treasury Secretary Janet Yellen has called on G20 countries to work with the US to set a minimum global corporate tax rate. Speaking ahead of the IMF / World Bank Spring Meetings this week, Yellen said a new worldwide minimum rate would put a stop to the “30-year race to the bottom on corporate tax” and would introduce a “more level playing field in the taxation of multinational corporations.”

Corporate tax hikes underpin the Biden administration’s ambitious USD 2 tn infrastructure investment plan unveiled last week — spending that would be underwritten by a seven basis-point corporate income tax hike to 28% and a higher minimum take on foreign income.

The story is dominating the front pages of the business press this morning: Reuters | FT | WSJ.

MARKET WATCH- US stocks hit fresh record highs yesterday after fresh economic data provided more evidence that the country’s economy is finally mounting a strong recovery from last year, covid shock, according to Bloomberg. The S&P 500 — which broke the 4k handle for the first time ever last week — gained another 1.4% during trading yesterday while the tech-heavy Nasdaq climbed 1.7%. The greenback and US treasury yields all fell as last week’s jobs report caused a surge in risk-on appetite.

FROM THE REGION- Jordan’s former crown prince has pledged loyalty to King Abdullah II after being placed under house arrest on Saturday for allegedly plotting with foreign actors to destabilize the country. Hamza bin Hussein, along with several other high-profile figures, were detained by the government last week to protect the “security and stability” of the country.

ALSO TODAY-

The Spring Meetings of the IMF and the World Bank Group continue today and run through Sunday, 11 April. This year’s virtual meetings will bring together central bankers, ministers of finance and development, private sector executives, representatives from civil society organizations and academics.

Later today: The IMF will give its latest forecast on the global economy — and its expectations for Egypt — when it publishes its World Economic Outlook.

The French Chamber of Commerce and Industry is hosting a working breakfast with Sovereign Fund of Egypt CEO Ayman Soliman today at the residence of French ambassador Stéphane Romatet.

The chamber is also hosting a webinar this afternoon that will take a deep dive into the Madbouly government’s program to create a national ID for all residential and commercial properties and to digitalize the country’s building permit system. The gathering runs from 4pm to 5:30pm and you can sign up here.

CIRCLE YOUR CALENDAR-

The business community has until this Thursday, 8 April, to raise concerns or otherwise give feedback on the Customs Act’s draft executive regulations, according to a Finance Ministry statement. The ministry apparently hasn’t received any complaints so far, clearing the path for the regs to come into effect. Under the proposed regulations, importers would be allowed to pay customs in chunks over six-12 months, depending on how established their business is. The regs would also allow goods to move out of Egypt without submitting waybills on the spot.

More information on the new construction licenses + building code will be made public before next Thursday: The government will hold a presser before 15 April to explain the details of the new system that will hand out construction licenses. The two-month pilot phase will begin 1 May before the system is fully rolled out at the start of the new fiscal year.

The Sovereign Fund of Egypt will issue the conditions booklet for the contract to develop the Mogamma El Tahrir this month, CEO Ayman Soliman said yesterday, according to the local press. Foreign and local investors will be able to bid for the contract, which will likely see the Mogamma transformed into a multi-purpose building, with a portion turned into an apartment hotel and others used for commercial purposes.

Shoukry in Lebanon tomorrow: Foreign Minister Sameh Shoukry will pass a message from President Abdel Fattah El Sisi to Lebanese president Michel Aoun when he lands in Beirut tomorrow for talks with caretaker prime minister Saad Hariri and House Speaker Nabih Berri, local media reported yesterday without providing further details.

Russian Foreign Minister Sergey Lavrov is due in town on 12 April to discuss the latest developments on the Grand Ethiopian Renaissance Dam, signaling Russia could be looking to play an active role in mediating the impasse, according to TenTV’s Al Mashhad (watch, runtime: 1:28). Lavrov’s planned trip comes after expectations that Russian President Vladimir Putin would visit Egypt sometime in March did not materialize.

Egyptian Iron and Steel’s mining spinoff should be going live on the EGX sometime this week as the parent company prepares to go into liquidation.

Amendments to the VAT act will be in the spotlight when Finance Minister Mohamed Maait meets this week with the House Planning and Budgeting Committee, committee head Fakhry El Fekky told Al Mal. The committee has a raft of amendments to the law to discuss, including applying the 14% tax to the rent and purchase of commercial and administrative properties, imposing VAT on crackers and some sweets, and removing the tax on imports of strategic commodities.

Inflation data for March will be out on or around Saturday, 10 April.

“Summer hours” will come into effect for retail stores and restaurants as of 17 April. This means retail shops can close at 11 pm (instead of 10 pm during the winter), while cafes and restaurants can stay open until 1 am (instead of midnight currently). We have more details on the winter vs. summer hours here.

The Central Bank of Egypt will meet to discuss interest rates on Thursday, 29 April.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

*** It’s Going Green day — your weekly briefing of all things green 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: Startups operating in the green economy, including renewables, agritech, waste and water management, did not announce any official investment rounds in 2020. Are VCs and angel investors wary about investing in the sector? A combination of startup pipeline scarcity, scalability, exit possibilities and good old covid could provide the answer, sources tell us.

Higher tax revenues will be used to subsidize increased government spending in the coming fiscal year, Finance Minister Mohamed Maait said yesterday. The Finance Ministry expects tax receipts to grow 11-12% in FY2020-2021, which will allow the government to pay for an increase in wages over the coming year, Maait told Asharq Business on the sidelines of a conference (watch, runtime 0:58).

Where’s the money coming from? Maait didn’t shed any light on how the ministry is planning to boost tax revenues. Cabinet said last month that the higher revenues will be underpinned by an expanded tax base and the rollout of electronic payment, and made no mention of changes to the tax code.

A mixed picture: The ministry has lowered its revenue expectations for the year ahead, and now thinks it will take EGP 150-160 bn less than EGP 1.3 tn figure in the draft budget released last month, said Maait, who blamed revenue shortfalls in the tourism and aviation sectors. Despite this, overall revenues are still forecast to rise by 15% during the year, he added.

A EGP 420 bn-shaped hole: The ministry has lost out on EGP 200 bn in revenues during the current fiscal year due to the pandemic, Al Arabiya reported Maait as saying during the conference. This puts the total shortfall caused by the pandemic over the past two years at some EGP 420 bn — more than a third of the total revenues the government expected to take over the course of the current fiscal year.

GDP growth is expected to slow to 2.8% in FY2020-2021, compared to 3.6% the previous fiscal year, the minister said. This puts predictions at the lower end of the 2.8-3.5% growth range previously announced.

But brighter times are ahead: Egypt’s real output is forecast to reach 5.4% in FY2021-2022 and could climb to 6% in FY2022-2023, the minister had said last month.

ALSO FROM THE CONFERENCE –

The government’s FY2020-2021 export subsidies are set to breach EGP 25 bn, Hapi Journal reports Trade Minister Nevine Gamea saying at the same industry event. Representatives from Export Councils met yesterday with the ministry to put the final touches on the new program. The government had allocated EGP 7 bn towards subsidy payments in its FY2020-2021 budget, up from EGP 6 bn the year prior. The Export Subsidy Fund has been paying out EGP 600 mn in arrears per month, in an attempt to settle overdue payments within three years.

An additional export subsidy scheme focusing on projects in the Suez Canal Economic Zone, Upper Egypt and the border governorates is planned for the coming year in cooperation with the Finance Ministry, Gamea said. The minister also said manufacturers could expect government support to cover shipping costs of their goods to African markets, as part of a government led strategy to expand exports to the continent.

The Health Ministry will start today vaccinating registered tourism workers at two centers in South Sinai and Red Sea after rolling out the pilot phase yesterday, spokesperson Khaled Megahed told El Hekaya’s Amr Adib last night (watch, runtime 2:05). The Health Ministry wants to get all workers in the sector vaccinated before the summer tourist season begins in June.

Some 177k people have so far been vaccinated out of the 928k who have applied to get the jabs, Megahed noted, calling on more citizens to register. Many have been redistributed to new vaccine centers to avoid overcrowding. The government has vaccinated 90% of registrees who suffer from three chronic diseases and 50% of those with two, he said.

Did you miss your appointment? You have three days to go and get it, else you’ll have to start the registration process again, Megahed said (watch, runtime: 2:12).

The Health Ministry reported 767 new covid-19 infections yesterday, up from 709 the day before. Egypt has now disclosed a total of 205,732 confirmed cases of covid-19. The ministry also reported 47 new deaths, bringing the country’s total death toll to 12,210.

Only folks with immunity against covid-19 will be allowed to perform the year-round umrah pilgrimage starting this Ramadan, the Saudi Ministry of Hajj and Umrah said in a tweet. That means people who are fully vaccinated (two jabs if you’re getting AstraZeneca, Pfizer, etc), who took the first dose 14 days prior to travel or who have fully recovered from the infection are eligible. The condition applies to those who will attend prayers in the Grand Mosque in Mecca, or enter the Prophet's Mosque in Medina, France24 reported.

Another two listings coming this year? An agricultural company and a petrochemicals firm will offer shares on the EGX this year, bourse chairman Mohamed Farid said yesterday, without disclosing whether they would be primary or secondary offerings. This came on the same day that Public Enterprises Minister Hisham Tawfik announced that two or three state-owned companies will sell shares in 3Q2021 in a reboot of the state privatization program.

Egypt has caught some of the global IPO fever in the past few weeks: Higher education management company Taaleem saw strong demand from institutional players and retail traders when it kicked off its IPO last week, while cosmeceutical and nutraceutical player Macro Pharma will start trading on 19 April. Consumer healthcare company IDH could go ahead with a 5% technical listing as soon as this month.

State priva-what program? Yeah, it has been a while. Even before covid, the government’s privatization drive had seen repeated delays and cancellations, with only Eastern Company going ahead with a secondary offering in the three years since the program was announced. The program ran headlong into global market turmoil last year though as the pandemic sent shockwaves through the global markets .Alexandria Containers, Abu Qir Fertilizers, and Sidi Kerir Petrochemicals have also pushed back stake sales.

ALSO KEEP YOUR EYE ON: Naguib Sawiris’ Ora Developers could IPO on the EGX at some point in the future and is currently planning to acquire a 600-acre land plot on the North Coast.

Azimut Egypt Asset Management plans to launch two new funds this year, with one going live within a few days and the other coming after Ramadan, Managing Director Ahmed Abou El Saad said at a conference yesterday, according to Hapi Journal. The Italy-based asset manager has obtained all necessary approvals for the funds and completed all the required procedures, he said without revealing further details.

Azimut’s first equity fund had a good 2020: Opened in July of last year, the AZ Equity-Egypt fund grew 35% during the latter half of the year to reach EGP 250 mn, primarily due inflows from European investors, El Saad said yesterday. The firm said at launch that the Luxembourg-headquartered fund would open with USD 10 mn in capital, and target USD 50 mn in AUM as a “first stage.”

And its bond fund has more than doubled in value since it launched in October. Azimut’s first Egypt-focused fixed-income fund, A-Z Savings, raised almost EGP 300 mn from investors when it launched at the end of October. The fund’s value had more than doubled to reach EGP 740 mn in March, Azimut said yesterday.

How big is Azimut? Parent company Azimut Group is an asset manager with EUR 57 bn in assets under management (AUM), while the Egypt arm says it has total AUM of EGP 7 bn.

ALSO FROM THE EGX-

The EGX plans to launch its first bond index before the end of June, and a trading platform is ready and waiting to go, local press quoted Chairman Mohamed Farid as saying during a conference.

Banque Misr has signed a USD 100 mn financing agreement with the Japan International Cooperation Agency (JICA) and Sumitomo Mitsui Banking Corporation (SMBC) for onlending to MSMEs, Banque Misr and JICA said in separate statements (here and here). The loan will improve access to finance for small firms, especially those owned by women. The statements didn’t specify how much JICA and SMBC are individually providing or quantify an earmark for women-led businesses.

This is the first financing to be agreed under JICA and SMBC’s sustainable finance framework, a set of guidelines launched last month that aims to ensure that finance produces socially and environmentally beneficial outcomes.

JICA’s commitments to Egypt now stand at almost USD 3 bn: Most recently, the agency inked a USD 240 mn loan in February to support public finances through covid and fund green projects. JICA is also committing funds to the construction of the Grand Egyptian Museum, upgrades to the Cairo metro, and is on board to finance four new electricity control centers and install almost 1 mn smart meters, among other things.

Naguib Sawiris is planning to take part in Egypt's ongoing gold exploration tender, the bn’aire said at a conference yesterday, the local press reports. Sawiris’ La Mancha Holding is the largest shareholder in Toronto-based Endeavour Mining, and also holds an almost 35% stake in Altus strategies, whose subsidiary Akh Gold landed four gold exploration licenses for nine Eastern Desert Blocks in a tender launched last year. La Mancha’s Endeavour was not among the companies the ministry said were awarded blocks, despite having reportedly made a bid.

Naguib has had his eye on gold mining in Egypt for some time now: Sawiris had expressed his interest in the government’s international gold mining tenders and said recent amendments to the Mineral Resources Act were “more favorable and more realistic and would attract foreign investments to the sector.”

He’ll have another two months to get a bid together: The deadline to submit bids in the ongoing round was recently extended to 15 May, after having originally been planned for 15 March.

Sawiris has been making moves elsewhere on the continent: Endeavour in February finalized the takeover of Senegal and Burkina Faso-focused Teranga Gold for almost USD 1.9 bn — an acquisition that created one of West Africa’s 10 largest gold producers.

The GERD impasse was the top story on the airwaves last night: The nation’s talking heads weren’t happy with Ethiopia last night, blaming our upstream neighbor for the latest failure in the ongoing GERD saga after talks in Kinshasa ended yesterday without an agreement on how to proceed with the negotiations. Former irrigation minister Hossam El Moghazy told Ala Mas’ouleety’s Ahmed Moussa that expecting success was always a long shot, given the history of failed attempts. Ethiopia is still continuing its pattern of equivocation and doesn’t want to reach a binding agreement to be able to control the Nile water to either generate electricity or build further dams, he added, highlighting that Egypt and Sudan might “run out of patience” if no progress is seen within three months (watch, runtime: 14:53 | 8:59).

Time to hope for a US intervention? The only possible way out is that Ethiopia postpones the second filling of the GERD at the behest of the US, Tarek Fahmy, political science professor at Cairo University, told Al Hayah Al Youm (watch, runtime 9:37). He added Ethiopia might seek a partial agreement that could include postponing the dam’s operation.

Warnings of conflict: Ambassador Mohamed Hegazy, former assistant foreign minister, told Masaa DMC that the current talks are Egypt's last genuine attempt to reach an agreement and Ethiopia should be aware that the second filling or other unilateral action could significantly destabilize the region (watch, runtime 6:11). Ahram Center for Political and Strategic Studies advisor Hani Raslan told Hadeeth Al Kahira that Egypt is continuing to work for an agreement, yet Ethiopia’s actions risks igniting a regional conflict (watch, runtime 8:25). Egyptian Foreign Minister Sameh Shoukry said earlier this week that the negotiations would be the last chance for the three countries to reach an agreement on the filling and operation of the dam before the rainy season when Ethiopia plans to fill the GERD for the second time, an act that President Abdel Fattah El Sisi has called a “red line.”

So, what’s next? Unconfirmed press reports had suggested that the three countries’ leaders could step in for a higher level summit if the ministerial meetings failed to yield a resolution.

The results of the Ever Given investigation could be announced this week: That’s according to Suez Canal Authority chief Osama Rabie, who told Hadeeth Al Kahira last night that the results are expected in the next 2-3 days (watch, runtime 5:17). Normal traffic was finally resumed yesterday, with 85-90 ships making the trip.

Still getting attention in the foreign press this morning: The online targeting of Marwa Elselehdar — Egypt’s first female ship captain — amid fake news that she was responsible for last month’s chaos in the Suez Canal. (Washington Post | Independent | Times of Israel | Entrepreneur)

Former prime minister and ex-IMF rep Hazem El Beblawi won’t be held liable for the alleged torture of US human rights advocate Mohamed Soltan, who was imprisoned in Egypt between 2013 and 2015, according to the Washington Post. El Beblawi was interim PM in 2013-2014. Soltan filed last year a federal lawsuit, but the US Justice Department asked last Thursday to dismiss the case after Beblawi was found immune from court proceedings in the United States, having stepped down from his position at the IMF and left the US at the end of October.

Egypt is planning to develop six “new cities” across the country, as part of its urban development plans, Deputy Housing Minister Walid Abbas said at a real estate conference yesterday. The government is currently conducting feasibility studies on the new cities, which would follow in the footsteps of other new developments such as New Alamein and New Mansoura, Abbas added.

Other things we’re keeping an eye on this morning:

• Snackfood maker Edita will reduce its issued capital (pdf) from EGP 145.1 mn to EGP 144.6 mn by cancelling 2.3 mn treasury shares.
• The Agriculture Ministry has issued the executive regulations for the Organic Farming Act, bringing into effect the seven-part bill, which governs tariffs, imports and exports, oversight mechanisms, and other aspects of the organic farming industry.
• The Central Bank of Egypt will provide subsidized funding through local banks to bakeries to encourage them to convert to natural gas, under an MoU signed with the Supply Ministry.
• State-owned Canal Sugar’s Minya factory has begun trial operations and commercial production will start before June — likely in May — and aims to reach maximum capacity of up to 1 mn tons of sugar by 2022.
• The Public Prosecutor has referred three defendants involved in the Fairmont case to the Criminal Court after they were accused of committing another assault against a woman on the North Coast in 2015.

Some 800 tickets were sold yesterday, the first day that the main hall of the National Museum of Egyptian Civilization was open to visitors, the Tourism and Antiquities Ministry said in a statement. The museum, which was inaugurated during a lavish ceremony on Saturday night, welcomed 800 visitors in addition to 400 local and international journalists during its first day. Another 600 tickets were sold online through the ministry’s website (tap or click), Executive Vice President Fayrouz Fikry said. Twenty-two royal mummies were transported to the site from the Egyptian Museum on Saturday in an extravagant made-for-TV parade.

April: The government’s fuel pricing committee is scheduled to meet for its quarterly review of prices

5-11 April: The Spring Meetings of the IMF and the World Bank Group will take place virtually.

5-6 April (Monday-Tuesday): Cityscape Egypt virtual conference on real estate investment.

6 April (Tuesday): French Chamber of Commerce and Industry in Egypt working breakfast with Sovereign Fund of Egypt CEO Ayman Soliman.

6 April (Tuesday): French Chamber of Commerce and Industry in Egypt will host the “Egyptian Government's Real Estate Wealth Inventory and Management Project” webinar.

7 April (Wednesday): British-Egyptian Business Association (BEBA) webinar on digital banking and fintech.

8 April (Thursday): The Information Technology Industry Development Agency (ITIDA) will host a matchmaking virtual event, dubbed “Hangout with VCs.”

8-10 April (Thursday-Saturday): The TriFactory’s Endurance Festival at Somabay.

12 April (Sunday): Russian Foreign Minister Sergey Lavrov will visit Egypt for GERD talks (watch: runtime: 1:28).

13 April (Monday): First day of Ramadan (TBC).

25 April (Sunday): Sinai Liberation Day.

29 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC),

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

1 May (Saturday): Labor Day (national holiday).

2 May (Sunday): Coptic Easter Sunday.

3 May (Monday): Sham El Nessim.

13-15 May (Thursday-Saturday): Eid El Fitr (TBC).

25-28 May (Tuesday-Friday): The World Economic Forum annual meeting, Singapore.

1 June (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).

7-9 June (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

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

17-20 June (Thursday-Sunday) : The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo), Cairo International Conference Center.

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

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

30 June (Wednesday): 30 June Revolution Day.

30 June- 15 July: National Book Fair.

1 July: (Thursday): National holiday in observance of 30 June Revolution.

1 July (Thursday): Large taxpayers that have not yet signed on on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

19 July (Monday): Arafat Day (national holiday).

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday)

23 July (Friday): Revolution Day (national holiday).

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

9 August (Monday): Islamic New Year.

12 August (Thursday): National holiday in observance of the Islamic New Year.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

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

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

1 October (Friday): Expo 2020 Dubai opens.

6 October (Wednesday): Armed Forces Day.

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

12-14 October (Tuesday – Thursday) Mediterranean Offshore Conference, Alexandria, Egypt

18 October (Monday): Prophet’s Birthday.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

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

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

29 November – 2 December (Monday-Thursday): Egypt Defense Expo

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

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

27 June – 3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish below between the actual holiday and its observance.