Tuesday, 10 August 2021

State-owned NIB prepares for restructuring — here’s what it owns and where it might be headed

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, friends, and welcome to a brisk news day at home and abroad on this holiday-shortened week.

THE BIG STORY of the morning: The apparent winding down of the National Investment Bank, the state-owned “development bank” that owns stakes in a host of companies. Liquidation is smart policy when you consider that those activities are best looked after (and largely sold off and / or managed by) the Sovereign Fund of Egypt. We have chapter and verse in this morning’s Speed Round, below.

The tourism industry is still celebrating the return of Russian tourists on direct flights to the Red Sea yesterday after a six-year hiatus. The news is getting plenty of attention from local and foreign press. Egypt pulled out all the stops at Sharm El Sheikh and Hurghada airports yesterday. We have More in Last Night’s Talk Shows and Egypt in the News below.

Also: The covid-19 case count inched up again last night, making it two weeks that numbers have been moving in the wrong direction. The figures are still very low, but it’s a reminder that you may want to put a mask on when you duck into your favourite coffee shop in Sahel. No mask outside? Totally cool, particularly if you’ve been jabbed. No mask indoors? Come on. (Oddly enough, covid does indeed exist on the shores of the Mediterranean.)

THERE ARE TWO BIG STORIES ABROAD this morning, and each of them has implications for Egypt.

FIRST: In a shocking development that absolutely nobody has warned of before, it seems some climate change effects may be irreversible — and it’s all our fault as a species. A report out yesterday from scientists working under the auspices of the United Nations “highlights human responsibility for heat waves, droughts, intense storms and other extreme weather events.”

The changes could be “irreversible for centuries,” as we noted yesterday afternoon. The scientists found that humans are “unequivocally” at fault here. Among the top offenders? Activities including transportation, energy and industry.

The “landmark report” still leads the front pages of the Wall Street Journal and Bloomberg on this fine Tuesday morning.

You can find the full, nearly 4k-page report here (there’s also a nice 50-page summary on the report’s landing page) or watch the recording of yesterday’s press conference (watch, runtime: 1:37:40) announcing the findings.

But don’t worry, the UK is holding a climate summit in November and will let folks from red list countries fly in despite the current mania about the delta variant of the virus that causes covid-19. Wonder if the attendees are going to buy carbon offset credits?

SECOND: Covid, covid and still more covid. Hot on yesterday’s suggestion that corporations are dialing back their fall plans is news that “China’s worst coronavirus outbreak since the virus first emerged in Wuhan is adding to concerns about the quality of vaccines [developed in China] amid a dearth of data on the efficacy of the shots.” The story is at the top of the front page of the Financial Times. Worries about covid are weighing on stock trading in Asia this morning, CNBC adds.

Elsewhere: The US military is going to make it mandatory for service members to be jabbed and some states with low vaccination rates are running out of ICU beds as the delta variant runs amok.

HAPPENING NOW- Americans: They’re just like us. The US Senate looks set to pass a USD 1 tn spending package to “invest in America’s crumbling infrastructure.” Senators voted overnight to end debate on the bill, setting up a final vote this week. The bill has Republican support and looks set to pass.


Are we the only ones being driven mad by the anticipation of visiting the Grand Egyptian Museum? We can’t drive to Sahel Smart Village and back without passing the place, and the wait is driving us bonkers. Videos like this one on the moving of the first Khufu boat aren’t making the wait any easier.

MORNING MUST READ- Mayar Sherif can’t stop making Egyptian tennis history, becoming the first Egyptian woman to make it to a Women's Tennis Association (WTA) final before going down to Germany's Andrea Petkovic in Cluj-Napoca, Romania. Sherif also cracked into the top 100 of the ATP rankings for the first time, claiming the 97th rank — the best ranking ever to be achieved by an Egyptian woman. Sherif had already become this year the first Egyptian woman to reach the main draw of a Grand Slam at the 2020 French Open, and the first Egyptian to qualify for the Australian Open.

CIRCLE YOUR CALENDAR- State-owned El Nasr for Export and Import is holding a webinar tomorrow on Gosoor — the government’s new e-catalogue for Egyptian products — to familiarize companies with export-ready products with the services offered by the platform.

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

enterprise

INVESTMENT WATCH

State-owned NIB prepares for liquidation

SMART POLICY- State-owned NIB prepares for liquidation: The government is moving ahead with its plan to liquidate the National Investment Bank (NIB) and is in talks with investors to sell off some of the bank’s subsidiaries as part of a reform plan agreed with the IMF last year, the financial daily Al Borsa (pdf) reports, citing informed sources. The heavily-indebted state-owned development bank (despite the name, it is not an investment bank) aims to sell its assets within the next 18 months and efforts are underway to reduce its liabilities, the sources said.

Dialling back risk: The decision to wind down the NIB was taken this year to reduce fiscal risk and protect financial stability, the IMF said in its recent review (pdf) of Egypt’s USD 5.2 bn standby loan program. The government agreed with the Fund to come up with a plan to mitigate risks posed by the bank’s financial position. While initially considering reform, following the results of an audit the Madbouly government opted to shutter the bank and in January halted its lending and funding operations.

The SFE will have a big say in what happens to the bank’s assets: Domestic press reports suggest the Sovereign Fund of Egypt (SFE) is still in talks to acquire a sizable chunk of the bank’s 69% stake in state-owned e-payments platform e-Finance, as well as its holdings in the petrochemicals and minerals sectors. NIB owns a 24.8% stake in Abu Qir Fertilizers, 12.8% of Misr Fertilizers Production Company (MOPCO) and 6.9% of Sidi Kerir Petrochemicals. Separately, the fund has acquired with private-sector giant EFG Hermes a 76% in the Arab Investment Bank, in which the NIB holds a 91.4% stake. The SFE has also been working to bring in investors to modernize commodities producer El Salhiya Investment and Development, which is a 44% owned subsidiary of NIB.

The bank also owns stakes in a host of other listed companies including 40.7% in the Export Development Bank of Egypt, 25.3% in Egytrans, 20% in Misr Beni Suef Cement, 10% in Abu Dhabi Islamic Bank Egypt, 9.6% in Misr Cement Qena, 3.7% in MNHD and 1.1% in Egyptian Financial and Industrial Company.

What does NIB owe? The Deloitte audit has not been made public, so it is unknown how much the bank actually owes. A bank report last year estimated that its debt pile had grown to more than EGP 650 bn. The NIB’s financial position has become increasingly fraught due to increasing liabilities, bad asset management, as well as issuance of deposit certificates with very high interest rates, Mona Bedeir, senior economist at Prime Holding, told us. Proceeds from selling the bank’s assets will be used to pay down its liabilities, easing the burden on the state budget, she added.

The government has been trying to tackle the problem since at least early 2019, when it set up a committee that eased some of the pressure by swapping some of the bank’s junk loans.

CLARIFICATION- In our story above, we quote Prime senior economist Mona Bedeir on factors that may have resulted in the financial position inherited by NIB’s current management team. Neither Prime nor Bedeir provided data or other information for the story — which, as we clearly noted, was first broken by Al Borsa based on the IMF’s review document (above). Prime has asked to “clarify that Mona Bedeir’s comment was limited only to the analytical aspect in terms of dissolving the entanglements between the Ministry of Finance on one hand and the Ministry of Public Enterprise on the other hand. She did not provide any comment on the technical management of National Investment Bank or the management of its assets. Prime apologizes if any offense was taken.” This clarification was added on 11 August 2021.

ENERGY

Egypt could liquefy and export Israeli natgas

Damietta, Idku plants could become LNG import-and-export terminals for Israeli natgas: Oil Minister Tarek El Molla discussed with his Israeli counterpart Karine Elharrar during a phone call yesterday “future plans” to receive and liquefy Israeli natural gas at Egypt’s LNG facilities (read: the Damietta and Idku liquefaction plants) before it is transferred to ships for export to other countries, according to a joint statement by the Egyptian and Israeli oil ministries.

The statement was otherwise scant on details, saying only that El Molla stressed the necessity of strengthening “bilateral and multilateral cooperation” between partners of the Eastern Mediterranean Gas Forum (EMGF) — established last year to create a “regional gas market” and act as a market platform for natgas producers — towards achieving their energy hub ambitions. The forum, which is led by Egypt till the end of the year and counts Palestine, Jordan, Greece, Cyprus, Italy and Israel as members, is due to hold its next meeting in Cairo in 4Q2021, after convening its last meeting here in town last March.

Will we be getting the gas through our new joint pipeline? Egypt and Israel agreed earlier this year to build a pipeline connecting Israel’s offshore Leviathan gas field to Egypt’s liquefaction plants to help Israel ramp up its exports to Europe. Israel’s Delek Drilling, a main operator of the Leviathan gas field, had said last year that it was mulling expanding its natural gas exports via Egypt’s Idku LNG terminal or by building its own floating terminal. At the time, the dispute over the Damietta plant — which came online in February following an eight-year hiatus — had not yet been resolved, leaving Idku as Egypt’s only viable LNG terminal. Leviathan’s offshore gas field came online in 2019 and supplies Egypt and Jordan.

Egypt already imports gas from Israeli offshore fields Tamar and Leviathan under a landmark agreement in 2018 between Alaa Arafa’s Dolphinus and Israeli oil company Delek Drilling and Texas-based Noble Energy. The agreement was later amended to increase supply to 87.5 bn cubic meters over the course of 15 years, ending in 2034.

BANKING

Egypt-based payroll platform Dopay is now Bank ABC Egypt’s banking agent

Egypt-based fintech startup Dopay will offer its digital payroll solutions to Bank ABC corporate clients after obtaining an agent banking license from the Central Bank of Egypt (CBE) through Bank ABC, according to a press release yesterday. The license enables Dopay to offer corporate banking services via its digital payroll and payment platform through which companies can pay their unbanked employees’ salaries. Staff will be able to receive their funds through a prepaid debit card. The license will allow Dopay clients to “instantly open accounts for their employees and other beneficiaries and pay them in real-time.”

About Dopay: Established in June 2014, Dopay works to provide payroll services for the unbanked to drive financial inclusion and digital transformation in Egypt. Dopay’s customers include McDonalds and mass transportation app Swvl, and the company implements payroll solutions for Barclays-Egypt. The company raised USD 2.4 mn in 2016 in a round led by Techstars Ventures and Force Over Mass Capital, and an additional EUR 1 mn investment from Dutch development bank FMO in March 2020.

COVID WATCH

The daily case count inches up again in Egypt as the rest of the world grapples with delta

The Health Ministry reported 83 new covid-19 infections yesterday, up from 65 the day before. Egypt has now disclosed a total of 284,789 confirmed cases of covid-19. The ministry also reported 7 new deaths yesterday, bringing the country’s total death toll to 16,582.

The daily new case count has risen consistently for the past two weeks, with the number of new reported covid-19 infections steadily inching up since 27 July, with the exception of a brief drop on 5 August, according to our in-house covid tracker.

University students across the United States are forging covid-19 vaccination documents through apps such as Instagram and Telegram, the Associated Press reports. Administrators say a national vaccine passport application is necessary to stop the forgery.

French cafes and bars now require proof of vaccination or a negative COVID-19. Cafes and bars that don’t follow the strict guidelines the government has set will face a seven day closure, with repeat offenders potentially facing jail time.

Tunisia vaccinated half a million people Sunday, the health ministry announced, after receiving more than six million doses from Western and Arab countries, Reuters reports. The pick-up in pace followed a wave of protests against the government’s slow vaccination campaign, with the country having administered two vaccine doses to 1.3 million Tunisians so far.

One person in Iran dies of covid-19 every two minutes — a new person is infected every two seconds, Iranian state TV said Monday, according to Reuters. The country is grappling with its most severe surge of infections to date and posted yesterday a new record daily death toll of 588.

CORRECTIONS

We goofed in our coverage of earnings reports in yesterday’s EnterprisePM and have corrected the stories on our website.

Mea culpa #1: CI Capital’s net income rose to EGP 974 mn in 2Q, not EGP 974k. Decimals — they’re hard.

Mea culpa #2: Ezz Steel did not make a loss in the second quarter; it recorded an EGP 1.21 bn profit after being in the red last year, according to its consolidated financials (pdf). The story has been updated on our website. Subsidiary Al Ezz Dekheila Steel was also in the black in 2Q2021, with the company reporting (pdf) yesterday an EGP 1.04 bn profit during the quarter, compared to an EGP 1.2 bn loss last year.

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ENTERPRISE+: LAST NIGHT’S TALK SHOWS

On an otherwise quiet summer evening on the airwaves last night, the Great Russian Return drove conversation: The nation’s talking heads fixated on the arrival of the first Moscow-Hurghada and Moscow-Sharm El Sheikh flights in six years, bringing more than 800 Russian tourists to Red Sea resorts. The Russian state aviation agency has given the greenlight to eight Russian airlines to operate five weekly flights to Hurghada and Sharm El Sheikh from 43 cities across Russia, while national carrier EgyptAir is set to operate four more weekly flights from Moscow to the two Red Sea resorts, Red Sea Governor Amr Hanafy told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime 4:03).

Tourism Minister Khaled El Enany phoned into Al Hayah Al Youm to applaud the resumption of flights. The minister used the occasion to say that tourist receipts have more than doubled over the past five months and are on track to bounce back to pre-pandemic levels. Al Hayah Al Youm (watch, runtime: 11:21 | 5:36) and Masaa DMC (watch, runtime: 4:08) also had coverage.

EGYPT IN THE NEWS

The return of Russian flights to Egypt’s Red Sea resorts Sharm El Sheikh and Hurghada is dominating the coverage on Egypt in the foreign press this morning, with everyone from Reuters and the AP to Bloomberg and AFP taking note.

Also making headlines:

  • The age-old craft of papyrus making goes virtual: Papyrus craftspeople around the country are selling their products online to survive the pandemic-induced tourism slump, AFP reports.
  • Al Jazeera journalist detained upon arrival in Egypt: Rabie El Sheikh will be detained for 15 days following his arrest at Cairo International Airport for “spreading of false news”, the Jerusalem Post reports.

PLANET FINANCE

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SUPERCYCLE WATCH- Aluminium prices are nearing a decade high of c. USD 2.6k per tonne this week, supported by a post-pandemic global economic recovery and a sustained rebound in prices of industry-related materials, the Financial Times reports. Aluminium prices rose 31% y-o-y in 2021, with the potential for this year to outstrip 2010 as the “largest annual demand growth in history,” one analyst told the salmon-colored newspaper. The price rally is good news for an industry that has suffered from years of oversupply amid relentless growth in China’s output.

As the Delta variant thrives, oil prices plunge: Prices eased 4% this week, following last week's 7% drop — which was the steepest in 9 months — as demand in Asia slows due to a renewed covid surge, according to a Financial Times report. China, the world’s biggest oil importer, has scaled back imports by 5.6% cumulatively y-o-y in 2021 so far.

Saudi Arabia’s budget deficit narrowed in 2Q2021 on higher oil, tax revenues: Saudi Arabia posted a deficit of USD 1.2 bn during the April-June period, down 96% y-o-y from the USD 29.12 bn recorded a year before. This came off the back of a 38% increase in oil revenues in 2Q2021, and the almost tripling of non-oil revenues to USD 31 bn, the Saudi finance ministry said in a statement picked up by Bloomberg. Improving public finances are largely attributed to an increase in oil prices, after having dropped to record levels during the depths of the pandemic last year.

Up

EGX30

10,800

+0.6% (YTD: -0.4%)

None

USD (CBE)

Buy 15.65

Sell 15.75

None

USD at CIB

Buy 15.65

Sell 15.75

None

Interest rates CBE

8.25% deposit

9.25% lending

Down

Tadawul

11,197.97

-0.15% (YTD: +28.87%)

Up

ADX

7,572.82

+0.95% (YTD: +50.1%)

Up

DFM

2,823.35

+0.02% (YTD: +13.3%)

Down

S&P 500

4,432

-0.09% (YTD: +18%)

Up

FTSE 100

7,132.3

+0.13% (YTD: +10.4%)

Down

Brent crude

USD 68.97

-0.1%

Down

Natural gas (Nymex)

USD 4.03

-0.69%

Up

Gold

USD 1,725.80

+0.54%

Up

BTC

USD 45,944.44

+6.19% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.6% at today’s close on turnover of EGP 1.8 bn (27.8% above the 90-day average). Local investors were net buyers. The index is down 0.4% YTD.

In the green: Telecom Egypt (+3.5%), Ezz Steel (+2.7%) and Medinet Nasr Housing (+1.5%).

In the red: AMOC (-3.6%), Speed Medical (-2.7%) and MM Group (-2.5%).

Asian markets are mixed this morning, with benchmark indexes in Tokyo and Hong Kong in the green while their counterparts in Shanghai and Seoul are in the red. Futures suggest shares in Europe and North America are likely to open in the red later today.

CALENDAR

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

26-28 August (Thursday-Saturday): Jackson Hole Economic Symposium.

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

2 September (Thursday): The new EGX mechanism for calculating closing share prices will come into effect.

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.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

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