Subsidized bread to rise in price for first time in a generation

SMART POLICY- Subsidized bread prices may increase for the first time in decades, after President Abdel Fattah El Sisi raised the prospect in a speech yesterday on the sidelines of an event that marked the opening of state-owned complex that will produce meals for school children (watch, runtime: 2:11). The president didn’t specify how much the price of a 5-piaster baladi loaf could increase by, but said that the increase would be modest. “I'm not saying we make it significantly more expensive, not as much as it costs to make it, which is 65 or 60 piasters, but [higher prices] are necessary,” El Sisi said. “It's unfathomable to sell 20 loaves for the price of a [single] cigarette,” he added.

The removal of bread subsidies could help get a parallel plan to improve child nutrition off the ground: The nationwide scheme is expected to cost EGP 7.7 bn, with a single meal served daily to each child expected to come in at between EGP 6-7, El Sisi also said yesterday (watch, runtime: 16:36). Among the ways the government will cover the cost is through making use of potential savings from cutting bread subsidies, as well as by tapping into separate budgets allocated individually to ministries, El Sisi added.

When will the final price be announced? The Supply Ministry is now drafting the new price hikes in a report that will then be shipped to the Cabinet for review and approval, ministry spokesperson Ahmed Kamal said, Al Shorouk reports.

The increase could affect the majority of the Egyptian population: Over 65 mn people are part of welfare programs that allocate five loaves of bread per day to each person at less than one-tenth of what it costs to produce. Prices of other essential commodities — including fuel — have increased in recent years as the Sisi administration gradually lifted ruinous energy subsidies, but bread remained untouched. Reuters took note of the story.

Bread subsidies have long been a controversial topic in Egyptian politics. ِِِA previous decision to hike the price of a loaf in 1977 prompted nationwide protests in what became known as “bread riots.”

ENVIRONMENT

El Gouna developer fighting USD 34 mn fine

The Environment Ministry is asking Orascom Development Egypt to cough up almost USD 34 mn, alleging that the company has caused environmental damage in El Gouna. The company said in a bourse filing (pd f) yesterday that it received a USD 33.9 mn compensation claim from the ministry’s Environment Protection Agency (EPA) in relation to its flagship Egypt destination. The ministry reportedly claims ODE inappropriately disposed of building materials, damaging the marine environment in the process.

The problem is, ODE says it doesn’t know what it’s being fined for: The EGX-listed company, part of the Sawiris family empire, said in a statement that the EPA has not provided evidence of its claims and has not responded to the company’s request for further information. ODE also says that a formal request was sent to the authority asking to be provided with technical reports or to reach a settlement on the compensation claims, which ODE says it was only informed about verbally. “ODE has not been given the opportunity to respond, whether technically or legally, to the allegations before the issuance of the claim,” the company wrote. We spoke yesterday with a company official confirmed ODE still hasn’t heard back from the authority.

Two separate letters from the EPA and ODE — copies of which were obtained by Hapi Journal — suggest some of the fines cover damage caused to El Gouna at the time of the “dragon” storm, which slammed into Egypt in March 2020. The total sum also allegedly includes an EGP 333k fine for breaching the Environment Act by failing to submit reports to the EPA on the project’s environmental impact before beginning work, as well as an EGP 33k fine for breaches of other other articles of the law.

The Environment Ministry declined to comment on the issue yesterday when we reached out asking for more information.

ODE has a reputation for being a good steward of the environment and has made its destinations’ natural beauty one of its primary marketing pillars. The company said yesterday that it has “always been strongly committed to the environment” and claims it is compliant “with all environmental laws.”

ODE’s shares slumped 9.3% in trading yesterday.

A MESSAGE FROM BUPA

BANKING

Credit risk is falling in the banking sector

An improving operating environment since 3Q2020 has eased pressure on Egyptian banks’ credit profiles and ratings, according to a Fitch Ratings report yesterday. Fitch had in July revised its outlook for the banking sector from negative to stable, “reflecting the stable outlook on the operating environment,” according to the report.

What’s driving the rosier outlook? With a reversal in capital outflows as investor confidence returns, Egyptian banks’ foreign currency liquidity improved, with foreign holdings of Egyptian treasuries increasing to USD 29 bn at the end of May from USD 10 bn in June 2020. The USD 5.2 bn IMF standby loan, as well as resilient remittances, also helped restore investor confidence, Fitch said. An increase in Egyptian banks’ net foreign assets to USD 1.7 bn by the end of June 2021 on the back of lower liabilities was also a good indicator.

Higher foreign liabilities still pose a risk: In efforts to recover from the aftermath of the covid-19 sell-off from emerging markets, while maintaining credit profiles and viability ratings, more Egyptian banks had to tap international financial institutions for funding “to support their FC liquidity.” However, higher foreign liabilities still raise some repayment risks. “Banks’ debt-servicing capacity could come under renewed pressure from another wave of sell-offs by foreign investors,” Fitch said.

The good news is that “about 70% of the sector’s external debt is long-term and banks hold enough stocks of FC liquid assets against their short-term FC liabilities.” While being equipped with readily-available liquidity buffers, some banks have already begun to remit their FC term loans, while directing lending to working capital financing rather than capex. Egypt’s expected stable current account deficit, higher FX reserves and an expected pick-up in tourism should also support banks’ FC liquidity going forward.

Egypt’s GDP is expected to grow at a 6% clip in FY2022-2023, up from 3% expected in the current fiscal year, according to Fitch estimates. Recovering economic growth and higher foreign investments, buoyed by low interest rates, are expected to drive “low double-digit loan growth in 2021, with an acceleration in 2022.” Last year, loan growth was boosted by both the CBE’s March 2020 decision to delay loan repayments for individuals and businesses by six months, and by initiatives to provide lending to SMEs and certain sectors at subsidized rates.

COVID WATCH

Egypt isn’t on the list as the US ships over 110 mn vaccines to 60 countries

Egypt is not on the list of 60 countries to which the US has donated and shipped more than 110 mn doses of covid-19 vaccines, according to a White House statement. The news comes after US President Joe Biden in June promised America would be “the arsenal of vaccines for the rest of the world.” Indonesia was the top recipient at 8 mn doses, followed by Columbia and the Philippines with over 6 mn apiece. Closer to home: Sudan, Tunisia, Morocco, and Jordan all received doses from the United States.

Egypt isn’t on the list despite the Biden administration saying in June said that it would be among 13 “regional priority” countries who would receive 6 mn of the first 25 mn donated doses. Iraq, Yemen, the West Bank and Gaza also missed out. Another 500 mn Pfizer doses are set to be shipped from the US to 100 countries starting at the end of August though, leaving open the possibility we could still be in line for some ‘Murican jabs.

The Health Ministry reported 53 new covid-19 infections yesterday, up from 51 the day before. Egypt has now disclosed a total of 284,415 confirmed cases of covid-19. The ministry also reported 5 new deaths, bringing the country’s total death toll to 16,540.

ELSEWHERE- China has imposed new travel restrictions after a fresh outbreak of infections thought to be caused by the Delta variant in eastern Jiangsu province spread to 15 others, the BBC reports. The outbreak is the largest China has seen for months, and authorities have imposed a three-day lockdown on over 9 mn people and cut Beijing’s travel links with areas with confirmed cases. Authorities in some provinces have even begun offering monetary rewards to encourage people to report those they suspect may be infected with covid-19.

TRANSPORT

EARNINGS WATCH

MOVES

ENTERPRISE+: LAST NIGHT’S TALK SHOWS

Two main topics were vying for the talking heads’ attention last night: Egypt’s handball team’s historic victory taking them to the semifinals in the Olympics for the first time after their 31-26 victory over Germany — and President Abdel Fattah El Sisi’s possible plans for a “modest” hike in the price of a 5-piaster baladi loaf. We have the full story on the potential increase in subsidized bread prices in the news well above. Al Hayah Al Youm (watch, runtime: 11:31) and Hadrat El Mowaten (watch, runtime: 4:45 | 5:40) are among those who took note.

Coverage of the Tokyo 2020 Olympic Games was everywhere, with former Egyptian Handball Federation head Hesham Nasr phoning into Channel One to laud the handball team’s triumph and discuss potential plans by the state to expand local sport infrastructure (watch, runtime: 5:41). The news got attention from Sada El Balad’s Ahmed Moussa (watch, runtime: 7:30). Egypt’s handball team is scheduled to meet France in the semifinals tomorrow (Thursday) at 10am CLT.

In preparation for the back to school season, teachers, school staff and all education-sector workers are next in line for covid shots under directives from El Sisi for their full immunization before the start of the 2021-2022 academic year in October, Masaa DMC’s Ramy Radwan said (watch, runtime: 1:19) last night. On the higher education front: Al Hayah Al Youm’s Lobna Assal discussed public universities’ acceptance requirements, (watch, runtime: 23:24), while Masaa DMC touches on the importance of vocational training in Egypt (watch, runtime: 22:30).

Also on the airwaves last night:

State-owned processed foodmaker Silo Foods, which will help produce school meals for some 13 mn children nationwide, puts Egypt on the right track for specific self-sufficiency in some food products (Al Hayah Al Youm | watch, runtime: 3:10).
President Abdel Fattah El Sisi has directed for the launch of a national health check-up initiative for would-be mothers to identify possible health risks for their future children (Masaa DMC | watch, runtime: 2:43).

This publication is proudly sponsored by

Infinity - http://www.weareinfinity.com/

EGYPT IN THE NEWS

** SHARE ENTERPRISE WITH A FRIEND **

Enterprise is available without charge — just visit our English or Arabic subscription page, depending on which edition you would like to receive. We give you just about everything you need to know about Egypt, in your inbox Sunday through Thursday before 7am CLT (8am for Arabic), and all we ask for is your name, email address and where you hang your hat during business hours.

ALSO ON OUR RADAR

PLANET FINANCE

Powered by

A second covid summer will hit tourism-reliant economies hard, with many emerging economies missing out on potential revenues as the cost of fighting the pandemic weighs on their balance sheets, the Financial Times reports. The first five months of 2021 saw international travel 85% down from its pre-covid levels, according to data from the World Tourism Organization. Smaller, less diversified economies such as the Bahamas, Maldives, and Fiji are set to feel the pinch the most, while countries such as Brazil, Mexico, and Argentina benefited from an increase in domestic tourism.

Strong earnings reports from major firms have buoyed Wall Street stocks, despite continued worries over the spread of the delta variant and a regulatory crackdown in China, the Financial Times reports. The S&P 500 had its highest close in a week, while the Nasdaq saw gains of 0.6%. More than 86% of US companies have topped earnings expectations so far, with 55% of companies in Europe also performing better than expected, though the results are “flattered by depressed levels in the year-ago period,” UBS Wealth analysts wrote in a note.

EGX30	10,726	-0.9% (YTD: -1.1%)
USD (CBE)	Buy 15.65	Sell 15.75
USD at CIB	Buy 15.65	Sell 15.75
Interest rates CBE	8.25% deposit	9.25% lending
Tadawul	11,208	+0.46% (YTD: 28.9%)
ADX	7,433	+0.39% (YTD: 47.3%)
DFM	2,795	+0.19% (YTD: 12.2%)
S&P 500	4,423	+0.82% (YTD: 17.8%)
FTSE 100	7,105	+0.34% (YTD: 10%)
Brent crude	USD 72.1	-1.08%
Natural gas (Nymex)	USD 4.03	+2.34%
Gold	USD 1,814.1	-0.44%
BTC	USD 38,218	-8.9% (as of midnight)

THE CLOSING BELL-

The EGX30 fell 0.9% at yesterday’s close on turnover of EGP 1.80 bn (29.8% above the 90-day average). Foreign investors were net sellers. The index is down 1.1% YTD.

In the green: Ezz Steel (+3.8%), Pioneers Holding (+2.9%) and GB Auto (+2.1%).

In the red: Orascom Development Egypt (-9.3%), Egyptian Resorts Company (-4.2%) and Cleopatra Hospital (-3.2%).

AROUND THE WORLD

IN DIPLOMACY- Foreign Minister Sameh Shoukry headed to Tunisia yesterday for a meeting with Tunisian President Kais Saied, carrying a letter from President Abdel Fattah El Sisi pledging his full support for Tunisia’s “transition to stability and growth,” according to a Foreign Ministry statement. Saied has suspended parliament, sacked the prime minister and axed the finance, environment and ICT ministers.

AROUND THE REGION- Ebrahim Raisi assumed office as Iran’s new president yesterday, in a ceremony marking his official endorsement by Supreme Leader Ayatollah Ali Khamenei. Hardline Raisi has inherited some serious issues from his more moderate predecessor Hassan Rouhani, including an economy wrecked by US sanctions, dire water and electricity shortages, and the most coronavirus-related deaths of any country in the Middle East. Then there’s the attempted revival of the nuclear pact with the US, with Tehran’s return to talks hanging in the balance as it continues to expand its nuclear program.

Yet more pressing for the new president is the diplomatic crisis triggered by a drone strike on an Israeli-affiliated oil tanker in the Persian Gulf last week, in which one British and one Romanian citizen were killed. The US and Israel followed the UK in blaming Tehran, which denied any involvement in the attack, adding further tension that has hardly helped attempts to rekindle nuclear talks.

Why hasn’t China taken a more active role in the GERD dispute? Deep commercial ties in Egypt, Ethiopia and Sudan mean that Beijing has avoided taking a stance on the increasingly bitter fight over the future of the Nile’s water, Asia Times writes. Although its investments in the region hand it significant leverage to influence the negotiations, China is unlikely to risk the bns of USD it has invested in infrastructure, analysts tell the newspaper.

ENTERPRISE EXPLAINS- Cairo Ring Road’s new BRT system: One of Cairo’s main roads is undergoing a major EGP 7.3 bn overhaul which is set to widen the congested 106 km freeway to 16 lanes by the end of this year, up from eight on most stretches today.

But most significantly, it will include an exclusive BRT (bus rapid transit) lane that could soon replace microbuses and other forms of public transit on the roadway. But so far, not much has been said or announced officially about the transition and the work needed to move us to this new system. However, by pooling information in the public domain as well as speaking to some of the parties involved, we can get an idea of what this new system will look like.

Here’s what we know so far about the new system: A consortium of local and international firms — led by French public transport company Transdev and including Orascom Construction, Mwasalat Misr and MCV Group — signed an MoU with the Transport Ministry’s Land Transport Regulatory Authority (LTRA) in May to begin technical studies. The surveys which are currently collecting key data about high traffic areas, ridership and high density bus and microbus stops on the Ring Road are expected to wrap up by October of this year, according to a Transdev Egypt representative who spoke to us on condition of anonymity.

Pricing of transport on it seems very likely to change: It's not yet clear how much the project will cost or what price range we can expect fares to be offered at but given that a non-compete clause, requiring a freeze on all new contracts for public transport options on the roadway, has been articulated in the consortium’s MoU with the LTRA, the Transdev representative tells us, it appears likely that traditional forms of transport on the Ring Road will have to make way for a newcomer.

What does our current transit landscape look like on the Ring Road: While sometimes dangerous and unreliable, microbus use in Cairo is currently an essential component of our transit infrastructure. Specific numbers are hard to come by for the Ring Road but two-thirds of all public transit use in the Greater Cairo region relies primarily on microbus travel, Mohamed Hegazy, director of urban transit research and consultancy firm Transport for Cairo (TfC), tells us. “Microbuses are fast and often provide a direct service to places where formal alternatives would require an interchange,” Hegazy says, which a majority of riders value over having to make multiple transit changes, he explains.

But microbuses also have a number of drawbacks that could make BRT buses a compelling alternative. Safety is a key factor, microbus riders surveyed by TfC said. Although a detailed breakdown for road accidents involving microbuses is scarce, government figures indicate that there were close to 10k road accidents in Egypt in 2019 and catastrophic headlines of microbus-involved collisions on roadways are frequent. Then there’s the lack of proper timetables, caused by drivers only departing once their vehicles are full.

Then there’s the environmental impact: Microbuses primarily run on low-quality diesel fuel and are often poorly maintained. Under the new BRT system we could be looking at somewhat of a marked improvement in air quality with the new natural gas-powered buses, Hegazy said.

So how would a BRT system measure up to microbuses? It all depends on how it's rolled out. With what we know so far about the improved reliability of BRT buses, especially if provided a designated lane and a rigorous commitment to pre-set schedules, the new project could offer riders travel times that are “as fast as traditional public transport at much higher service quality,” Hegazy says.

What is yet to be announced and will likely be one of the foremost concerns for riders is ticket pricing. Riders using microbuses on the Ring Road now pay between EGP 5 -15 per trip and usually get direct access to their destinations. While safety and reliability could be vastly improved under the new system we’ll likely need to see a form of integrated payments between BRT buses and other forms of ancillary transit like the new Metro Line 3 or the upcoming Monorail project for the new system to achieve its maximum benefit.

What do BRT systems look like: In other parts of the world, like Brazil, France and Mexico, where BRT systems have been fully developed, buses are given their own designated lanes with clear stops that often allow riders to pay fares at the station ahead of time instead of onboard buses. Platform level boarding and reliable schedules also supposedly make them a more convenient and easily accessible option for riders. Fare integration, which allows riders to use a single card across multiple modes of transit, is another crucial development associated with BRT systems globally which could also become a component of our own BRT system here in Cairo, a Transdev representative tells us.

Your top infrastructure stories for the week:

EBRD to finance half of the Sixth of October Dry Port: The European Bank for Reconstruction and Development will provide the October Dry Port Company with a USD 29.6 mn loan to part-finance the development of the USD 60 mn Sixth of October Dry Port.
And it’s contributing to the Abu Qir metro project, too: The EBRD has agreed to loan Egypt EUR 250 mn to fund the conversion of Alexandria’s Abu Qir Railway into an underground metro.
HAC handed new wastewater treatment contract: Hassan Allam Construction has been awarded a contract to construct a wastewater treatment plant with a capacity of 30k cubic meters per day in Maghagha, Minya.
West Bakr wind turbines brought online: Lekela has linked 20 wind turbines at its USD 350 mn, 250-MW West Bakr project in the Gulf of Suez to the national grid.
Ain Sokhna’s livestock facility to restart this month: DP World Sokhna will serve the Egyptian conglomerate Intro Group’s livestock facility in Ain Sokhna port upon its restarting under a multi-year agreement this month.

CALENDAR

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.

9 August (Monday): Russian flights to Sharm El Sheikh, Hurghada resume.

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

September: Delegation of Russian companies to visit Russian Industrial Zone.

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

7-8 September (Tuesday-Wednesday): Euromoney Conferences will host the GlobalCapital Sustainable and Responsible Capital Markets Forum 2021, featuring Vice Minister of Finance Minister Ahmed Kouchouk.

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.

21-22 September (Tuesday-Wednesday): The Federal Reserve meets 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.

October: New legislative session begins.

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.

1 October (Friday): State-owned companies and government service bodies selling goods and services to customers that have not yet signed 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.

6 October (Wednesday): Armed Forces Day.

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

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

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.

31 October – 12 November (Sunday-Friday): The 26th UN Climate Change Conference, Glasgow, UK.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

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.

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

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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.

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

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.

	Country	????	????	????	Total
1	China	32	21	16	69
2	US	25	29	21	75
3	Japan	19	6	11	36
4	Australia	14	4	16	34
5	ROC (Russia)	13	21	18	52
78	Egypt	0	0	2	2

Subsidized bread to rise in price for first time in a generation

TL;DR

WHAT WE’RE TRACKING TODAY

SUBSIDIES

Subsidized bread to rise in price for first time in a generation

ENVIRONMENT

El Gouna developer fighting USD 34 mn fine

BANKING

Credit risk is falling in the banking sector

COVID WATCH

Egypt isn’t on the list as the US ships over 110 mn vaccines to 60 countries

TRANSPORT

The little engine that could…

EARNINGS WATCH

MOVES

ENTERPRISE+: LAST NIGHT’S TALK SHOWS

This publication is proudly sponsored by

EGYPT IN THE NEWS

ALSO ON OUR RADAR

PLANET FINANCE

AROUND THE WORLD

CALENDAR