Sayonara, Ever Given

Good morning, friends — We have another politics-heavy issue for you this morning, and it’s likely to stay that way until the end of the week, with the UN GERD vote possibly happening tomorrow, the OPEC+ fail continuing to roil oil markets, and today’s big send off for our 400 meter-long friend in the Suez Canal. Speaking of which…

Today is the day we say sayonara to the Ever Given. The mega container vessel that managed to get itself stuck in the Suez Canal for six days in March will finally be allowed to leave Egypt today after its owner came to an agreement with Suez Canal Authority this week. A signing ceremony for the settlement will take place in Ismailia later today, after which the Ever Given will up-anchor and leave the Bitter Lake, where it has been detained for almost three months.

The final hurdle was cleared yesterday when the Ismailia Economic Court allowed the ship’s release, lifting a court order allowing the SCA to confiscate the vessel. This came a few days after the ship’s owner Shoei Kisen reportedly agreed to pay USD 540 mn to the authority (though we still don’t know the precise terms of the agreement). The story is receiving coverage in the Associated Press and Reuters.

THE BIG STORY ABROAD- There’s no single story dominating the front pages of the foreign press this morning:

• Microsoft kicked off Pentagon contract: The Biden administration has cancelled Trump’s so-called “Jedi” contract that would have seen Microsoft provide cloud services to the Pentagon, and will likely choose Amazon instead. This has reportedly sent Jeff Bezos’ personal fortune soaring to a record USD 211 bn. (Reuters | WSJ | FT)
• “Bad, bad, really bad news for the emerging markets”: A stand-out quote from this Washington Post article which asks what will happen in the developing world when the Federal Reserve raises interest rates.
• The Big Apple may have a new mayor: Democratic candidate Eric Adams is poised to become New York’s new mayor. (Reuters | AP | NYT)

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THE BIG STORY TOMORROW- The UN Security Council will hold its long-awaited meeting tomorrow to discuss the Grand Ethiopian Renaissance Dam (GERD). Foreign Minister Sameh Shoukry has been in New York this week in diplomatic meetings with Security Council member states, yesterday holding talks with the five permanent members of the council (US, China, Russia, UK and France) ahead of tomorrow’s meeting.

We have more details on what is happening with the draft resolution in this morning’s talk shows section, below,

Meanwhile, the dam is being filled: Egypt’s Irrigation Ministry said on Monday that Ethiopia had resumed filling the reservoir of the dam for the second time. Ethiopia is yet to comment on the ministry’s statement.

UN, US call for calm: The UN and US yesterday urged Egypt, Sudan and Ethiopia to avoid taking any unilateral action and called on them to return to the negotiating table, Reuters reports. UN Secretary-General Antonio Guterres reiterated support for the current African Union-mediated process, with his spokesperson calling on the countries to “recommit themselves to engage in good faith in a genuine process.”

Ethiopia has sent its own letter to the council, objecting to the “meddling” of the Arab League in the issue, according to the Ethiopian Foreign Ministry. The statement is referring to the emergency meeting last month in which the league called on the UN Security Council to intervene in the dispute.

And Saudi Arabia has reiterated its support for Egypt and Sudan, calling on the international community in a statement yesterday to “intensify efforts” to find a solution to the dispute.

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EGX UPDATE- Blame the sell-off on the GERD: The 1.9% slump on the EGX 30 yesterday was the market reacting to the rising GERD tensions, Pharos Holding’s Radwa El Swaify told us yesterday. Rania Yacoub, chair of the board of directors of Three Way Brokerage, told Reuters the same, saying that “there are no other reasons for the decline.”

Every stock listed on the benchmark index except for Egypt Kuwait Holding finished in the red yesterday, with Ezz Steel (-5.0%), Pioneers Holding (-4.5%) and Heliopolis Housing (-4.0%) the biggest losers.

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

• New caps on cement sales could come into effect next week, finally bringing some relief to the ailing industry which has struggled to pull itself out of a years-long slump caused by rampant oversupply.
• Activity in Egypt’s non-oil private sector was close to growth in June, as growth in output and new orders strengthened the PMI gauge to 49.9 — just 0.1 points beneath the 50.0 mark that separates growth from contraction.
• The EGX 30 closed nearly 2% in the red yesterday, with both foreign and local investors emerging as net sellers.

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MARKET WATCH- Oil prices are whipsawing as the market tries to second-guess the fate of the teetering OPEC+ alliance. Brent briefly surged to a six-year high before closing almost 3% in the red today as the failure of OPEC+ to raise supply sharply increased market volatility. A rare, and as-yet unresolved public dispute between Saudi Arabia and the UAE over production quotas has the world wondering whether the alliance will be able to agree to raise supply.

The immediate risk: Rising prices and higher global inflation. A OPEC+ pact is needed to temper price which have surged in recent weeks as supply fails to meet surging demand.

And in the medium-term: Discord in OPEC+ could result in a new price war, with countries producing however much they want, and sending prices plummeting. As one analyst said; “If you have 23 oil-producing countries that are party to an agreement, and that agreement isn’t extended, and the price of crude is in the mid- USD 70s, that’s an engraved invitation to overproduce.” Bloomberg and CNBC have more.

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Three Egyptian asset managers have made Forbes’ ME 30 Biggest Asset Managers 2021 list. EFG Hermes was the highest-ranked Egyptian firm, coming in at #17 with USD 3.5 bn in assets under management (AUM). Misr Capital placed at #22 with USD 2 bn and Al Ahly Financial Investments Management was ranked #28 with USD 1.4 bn AUM.

Saudi Arabia dominated the list with 16 entries, with NCB Capital coming at the top with USD 50 bn AUM, followed by the UAE with five companies and Bahrain with three.

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CIRCLE YOUR CALENDAR-

Among the handful of dates to keep an eye on:

• Fuel pricing: We should hear by Saturday whether the government will raise, hold or cut fuel prices for the coming quarter.
• Inflation: Data for June will be released next week.

The EGX will hold its board elections for the 2021-2025 term on Wednesday, 14 July. Here’s a rundown of the candidates vying to fill board positions.

The Cairo International Book Fair is ongoing at Egypt International Exhibition Center today. The event will run through to 15 July.

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

Hotel occupancy rates in key Egyptian holiday destinations rose to 35-40% in the first six months of 2021, Reuters reports, citing an unnamed tourism official. Occupancy in Red Sea resorts Sharm El Sheikh and Hurghada almost doubled to 35-40% from 20-23% in the same period a year earlier, while hotels in Cairo operated at 45% capacity, up from 27% last year, the source said.

Occupancy limits raised: The government yesterday began allowing hotels, restaurants and other non-essential businesses to operate at 70% capacity, raising the 50% limit that had been in place for a year.

The recovery is real: Some 3.5 mn tourists visited the country during the first six months of the year — almost the same number of people who visited Egypt in the whole 2020. This brought in revenues worth USD 3.5-4 bn. Tourism is a vital source of hard currency for Egypt and accounts for around 15% of GDP, but the shuttering of the industry due to covid caused revenues to plummet 70% to just USD 4 bn last year.

The latest figures are in line with forecasts: Colliers International expects average occupancies in Sharm El Sheikh and Hurghada to hit 42% and 46% respectively through 2021. Cairo and Alexandria are expected to achieve rates of 44% and 59%.

The government is also optimistic: Egypt is expecting a 45-60% y-o-y increase in incoming tourists, and is eyeing tourism revenues between USD 6 bn and USD 9 bn by the end of 2021.

But: Some countries continue to see Egypt as a risk. European travel operator TUI yesterday suspended all summer holiday packages to Egypt until 31 July due to “uncertainty around travel." The UK and Morocco have put in place a mandatory quarantine for travellers flying in from Egypt, and Saudi Arabia has classified the country as a “very high risk” destination.

Then there’s Russia, which is taking its sweet time adding its “finishing touches” to plans to resume flights to the Red Sea. We were expecting Russian tourists to start flying into Sharm and Hurghada in June, but Russian officials have refused to commit to a timetable.

A slow vaccine rollout is seen as the biggest threat to domestic tourism, something the government is doing its best to mitigate. While only 7.5% of the eligible people have received a shot of the virus over the past five months, the government is trying to ramp up domestic vaccine production and raise this number to 40% by the end of the year.

Nile Misr Medical Holding is ready to exit the race to acquire Alexandria Medical Services should the bidding war continue to drive up the purchase price, the CEO of the company told us yesterday. “We’re still in the race, but we think [offers on the table] are on the high end of the valuation,” said CEO Tarek Moharram, without disclosing the value of Nile Misr’s bid. Moharram’s Elevate Private Equity set up the USD 380 mn healthcare platform earlier this year alongside Misr Capital.

The most recent bid: EGP 740 mn. Tawasol Holdings and LimeVest last month offered to purchase a 74% stake in Alex Medical at EGP 52 a share. Tawasol already owns 26% of Alex Medical, meaning the acquisition would give the consortium 100% ownership.

This was a response to bids submitted by Tana Africa and Global One Healthcare, which offered to purchase the company for EGP 49.04 per share and EGP 47.98. Cleopatra Hospitals Group, meanwhile, has the lowest bid, valuing the company at EGP 550 mn with its EGP 38.53 per-share offer in May.

Could it climb further? PwC reckons so. The accounting firm’s due diligence report suggested that this could rise to EGP 800 mn, given the strong competition for the company.

One player has already left the game: Speed Medical quit the Tawasol-LimeVest consortium in May for unknown reasons. The group had previously offered to purchase shares for EGP 38.09 apiece in April.

The trigger for the bidding war: Abu Dhabi Commercial Bank (ADCB) wants to sell its 51.4% stake in the company that it acquired from NMC Healthcare’s BR Shetty. ADCB was one of the Emirati healthcare firm’s main creditors when it went into administration last year.

OTHER M&A NEWS-

• Maridive isn’t selling its subsidiary: Maridive Oil & Services said talks with Jeddah-based Al Subaie Investment Group over the sale of its subsidiary Maridive Offshore Projects have ended without agreement, the EGX-listed company said in a statement (pdf). Maridive’s board in February approved Al Subaie’s offer to purchase 100% of the subsidiary for USD 48 mn.
• Remco shareholders have agreed to study a bid from unnamed local investors to acquire a 99.98% stake in Empain Tourism Investments, it said in an EGX filing (pdf).

FX reserves slightly up in June: Egypt’s foreign currency reserves inched up by almost USD 116 mn June to USD 40.58 bn from USD 40.47 bn in May, according to official figures released by the the Central Bank of Egypt yesterday. FX reserves rose by almost USD 125 mn in May.

Reserves are still about USD 5 bn short of where they were prior to covid: The country’s stockpile fell by almost USD 10 bn from the USD 45.5 bn peak in February 2020 due to the covid-induced sell-off of emerging-market assets, and the lockdown of the economy in the second quarter.

EGX companies face new diversity targets: New listing rules announced by the Financial Regulatory Authority yesterday designed to promote female representation in boardrooms could shake up the traditionally male-dominated hierarchies of Egyptian corporates. Under the changes, the boards of EGX-listed firms and non-banking financial services companies will be required to be at least 25% women.

The regulator tried something similar last year: The FRA gave the 48% of EGX companies that still had all-male boards until the end of 2020 to appoint just one female director. This didn’t quite go to plan though, with EGX boss Mohamed Farid admitting that by the end of 2020, the percentage of companies with female representation had risen to just 65%.

Things seem to have improved since: Almost 85% of EGX companies now have at least one woman on their boards, according to figures given by FRA head Mohamed Omran yesterday. Two hundred of the 237 companies listed on the exchange are now in compliance, he said, adding that 581 NBFS institutions now have female representation.

Compare this to 2019, when more than half of listed companies didn’t have a single woman on their boards.

Then there’s this: Figures from the 2020 Women on Boards Observatory report (pdf) report show that women accounted for 11.2% of all directors in listed companies last year, which while low, is an improvement on the 10.1% a year earlier. And companies regulated by the FRA increase female representation to 14.7% from 11.2% during 2020. The only industry to see a regression was banking, which fell to 13.7% from 14.7%.

The FRA has tried to promote workplace diversity below the board level too: At the end of last year, it announced that it would slash development and service fees for companies whose staff were at least 25% women.

Orascom Construction added new awards worth USD 1.1 bn to its backlog during 2Q2021, the company said in a statement. Egypt’s projects accounted for 32% of new awards in the water and industrial sectors, while the remaining 68% were for data center projects in the US. In 1H2021, the company netted USD 1.8 bn in new awards.

World Bank, EU become observers at EastMed Gas Forum: Members of the East Mediterranean Gas Forum have agreed to bring the World Bank and the European Union into the organization as observers during a meeting in Cairo yesterday, the Oil Ministry said in a statement. The Cairo-based forum aims to serve as a platform for regional natgas players to develop resources and infrastructure, cooperate on exploration, and regulate the region's natgas policies. Egypt, Cyprus, Greece, Israel, Italy, Jordan and Palestine are all founding members. France later joined as a member while the US is taking part as an observer.

EFG Hermes consumer finance subsidiary Valu will offer financing for patients of Saudi German Hospital, under a new partnership agreement, the companies announced in a joint statement (pdf) yesterday. The financing platform will offer installment programs up to 60 months, with 0% interest and no down payments for a period of six months. The agreement aims to make quality healthcare services more accessible to more segments of patients in the market, especially those without ins. coverage.

Kenya will continue exempting Egyptian exports from customs duties for another year, Trade and Industry Minister Nevine Gamea said yesterday. The Kenyan government threatened to impose a 25% customs duty on some Egyptian exports back in 2020, but later backed off and signed a one-year agreement under the Comesa trade framework that was this week extended for another year.

Taqa to install solar panels in Somabay: Taqa Arabia subsidiary Taqa Power will build two solar facilities worth USD 4 mn in Somabay, that will produce a combined 5 MW of power, Taqa and Abu Soma Touristic Development said in a joint press release (pdf).

Egypt Kuwait Holding has approved the resignation of its vice chairman, Loay Al Kharafi (bio), the listed company said in a statement (pdf). Al Kharafi has served as the company’s vice chairman since 2012. It is unknown who will replace him.

Hussein Mostafa Fathy has been named the head of the Egyptian State Lawsuits Authority effective 1 July, according to a presidential decree (pdf) published in the Official Gazette. Fathy has replaced Abu Bakr El Seddik.

Maged Abdelfattah Abdelaziz should have his own TV channel: The Arab League’s UN ambassador was on the airwaves for the third night running last night, discussing the GERD crisis and tomorrow’s UN Security Council meeting on Kelma Akhira (watch, runtime 12:21) and Yahduth Fi Masr (watch, runtime 5:30 I 2:10).

What is happening with the draft resolution proposed by Egypt and Sudan? The UN Security Council held a consultation session yesterday to discuss Egypt and Sudan’s draft resolution, Abdelfattah told El Hadidi, without mentioning any details of the discussions. Egypt, Sudan and Tunisia are now expected to meet to discuss the member states’ notes on the resolution, he added.

When can we expect a vote? Security Council members could vote tomorrow or next week, depending on their opinions on the draft text, he said. Should members only want to make minor changes, a vote could take place tomorrow, but should there be substantive issues with the main points of the resolution, the vote could be pushed to next week.

Refresher on the draft resolution: Egypt and Sudan want the UN to push Ethiopia into resuming the AU-sponsored talks. The resolution would require the three countries to finalize an agreement on filling and operating the dam within six months.

The GERD was widely covered and analyzed by most talk shows: Ala Mas'ouleety (watch, runtime 7:28), Al Kahera Wal Nas (watch, runtime 20:47), Masaa DMC (watch, runtime 11:45), Al Hayah Al Youm (watch, runtime 47:50), Yahduth Fi Masr (watch, runtime 1:49 I 2:11 I 2:42 I ) and Kelma Akhira (watch, runtime 11:37 I 7:53) all had extensive coverage.

It’s a mixed bag in the foreign press this morning: The Africa Report asks whether increasing private sector involvement in the nation’s railways is enough to prevent future accidents, while the New York Times is out with an audio-visual article featuring interviews with women who claim to have been assaulted by security forces. Meanwhile, Ars Technica looks at the ethical implications of displaying mummies to the public.

The Health Ministry reported 164 new covid-19 infections yesterday, down from 175 the day before. Egypt has now disclosed a total of 282,421 confirmed cases of covid-19. The ministry also reported 22 new deaths, bringing the country’s total death toll to 16,306.

The US is trying its hardest to stop the EU taxing its tech companies: Washington is pushing the European Union to call off its plan to impose a new digital tax on US tech companies that operate inside the bloc, the Financial Times reports. The US argues that the levy jeopardizes ongoing negotiations to introduce a global minimum corporate tax rate, which received approval by 130 countries last week.

US and EU officials will convene to discuss the tax levy this week, ahead of a meeting of the G20 finance ministers on Friday, which aims to finalize the agreement before G20 leaders meet in October.

1-10 July (Thursday-Saturday): The government’s fuel pricing committee will meet to announce 3Q prices.

8 July (Thursday): The UN Security Council will meet to discuss the GERD crisis with Egypt, Sudan and Ethiopia.

11 July (Sunday): Ismailia Economic Court will hold a hearing on Ever Given compensation case.

14 July (Wednesday): The EGX will hold board elections for the 2021-2025 term.

Mid-July: Legislative session expected to end.

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

21 July (Wednesday): Clean Energy Business Council’s webinar Women entrepreneurs in clean energy (3pm)

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

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

23 July-11 August (Friday-Wednesday): Tokyo 2020 Olympics.

2-4 August (Monday-Wednesday): Egypt is hosting the Africa Food Manufacturing exhibition at the Egypt International Exhibition Center.

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.

3-5 September (Friday-Sunday): The World Karate Federation will hold the third competition of the 2021 Karate 1-Premier League in Cairo.

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

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

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.

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

1 October (Friday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

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.

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

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

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

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

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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

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

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

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.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

May 2022: Investment in Logistics Conference, Cairo, Egypt.

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.