AM — Thousands of companies just got a temporary reprieve on the new minimum wage

Good morning, everyone, and happy Wednesday to you all. Just three more sleeps until (western) Christmas for the kids out there who celebrate the occasion.

PSA #1- We’re taking a handful of our customary end-of-year publication holidays. EnterprisePM is going on break today and will return on 2 January. EnterpriseAM will be off this coming Sunday (26 December) and then again on Thursday (30 December). We’re using both days to get some pipefitting and plumbing done ahead of the new year.

There’s no word yet from Cabinet, the central bank or the stock market on whether we’re all getting a day or two off. New Year’s Day and Coptic Christmas both fall on weekends this year. Our Spidey-Senses tell us: Don’t hold your breath.

WANT TO HAVE BREAKFAST WITH US? Every year, we ask our readers to weigh in on what you expect for the year ahead in our Enterprise Reader Poll. Take a few minutes to give us your take on the outlook for your business and industry, whether you’re planning fresh investments and new hires, and how your business fared in the year past. We’ll share the results with the entire community in early January to help you shape your view of the year.

We’ll be inviting eight readers who take the poll to breakfast in 2022 and another dozen of you will get your very own Enterprise mug in which to enjoy your morning beverage of choice.

THE BIG STORY ABROAD- It’s a mixed bag out there this morning. The Financial Times is still worried about the prospect of conflict between Russia and Nato over Ukraine. Both the FT and Bloomberg are paying close attention to Turkey after Erdogan announced what the salmon-colored paper thinks amounts to a “back-door” interest rate hike.

Shares on Wall Street snapped a three-day, virus-fuelled losing streak, but everyone is still freaked out about omicron. Scientists are warning that Joe Biden’s containment plan is insufficient and London has cancelled its Trafalgar Square New Year’s Eve party,

WHAT’S HAPPENING TODAY-

Stay tuned for an imminent announcement on Ghazl El Mahalla’s micro-IPO: The subscription period for the state-owned football club’s upcoming EGX debut will be announced within a week, Public Enterprise Minister Hisham Tawfik told Al Mal yesterday. The ministry hopes to complete the transaction by the end of the year, Tawfik added. The club is expected to raise EGP 135 mn from the sale, which will see it list up to two-thirds of its shares on the EGX. While tiny, Ghazl El Mahalla’s offering could pave the way for football giant Al Ahly to list as much as 49% of the club.

PSA #2- CIB is offering a helping hand to small businesses: Our friends at leading private sector bank CIB are offering a number of small businesses in-kind support worth up to EGP 50k, while one small business will land support worth EGP 250k, as part of its “Growing Together” CSR initiative, according to a press release (pdf). The support includes advisory services and coverage of up to 80% of the costs of consultancy services through its Business Solutions program. This comes as part of the bank’s efforts to help small businesses with annual turnover of EGP 1-50 mn access funding and the banking system.

CIRCLE YOUR CALENDAR-

PSA #3- Property owners have until Friday, 31 December to pay the second installment of their annual real estate taxes without incurring a late fee. The first installment was due between 1 January and 30 June. Homeowners whose primary residence is valued at less than EGP 2 mn are exempt from paying the tax.

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

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development as well as social infrastructure such as health and education.

Infrastructure in 2021- Part I: Transport. A year that once again underlined the human costs of operating an underfunded rail network, 2021 also saw a strong policy response, with bns of USD of fresh development finance and public investment earmarked not just for the nation’s railways but for other transportation infrastructure too.

Thousands of companies will be given a six-week reprieve from the new private sector minimum wage requirement coming into force at the beginning of 2022 under a decision by the National Council for Wages (NCW), the Planning Ministry said in a statement yesterday. Thousands of companies had filed requests for exemptions from a requirement to start paying all employees a minimum wage of EGP 2.4k per month from 1 January.

What’s changed? Companies that have filed for an exemption can continue with their salary structures unchanged until mid-February, by which time the council aims to have finished ruling on requests.

Some 3k companies have already gotten approvals on their requests for exemptions and will be notified in the coming days, Planning Minister Hala El Said told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 14:32). All of those businesses are in industries that faced either partial or complete closures because of the pandemic, the minister said.

Who’s angling for postponement or exemption? The council received requests from companies in the textiles and readymade garments, tourism, paper, and retail industries, among others, as well as some private schools with annual tuition fees below EGP 10k, according to El Said.

Companies have been pushing back against the new minimum wage since it was announced earlier this year, with thousands of firms telling their government they will not be able to afford the wage hikes. Companies have claimed that high employment counts, increased production costs, and the pandemic have left them unable to pay for the additional labor costs.

So what happens in the middle of February? There hasn’t been a decision yet on whether or not companies whose exemption requests are tossed out will then be required to retroactively pay their employees the minimum wage, NCW member Magdy El Badawy told Enterprise.

And what happens in cases of non-compliance? The government will ensure the minimum wage is being enforced through regular inspections from the Manpower Ministry, as well as by relying on complaints and reports of noncompliance filed to the council, El Said told Lamees. The penalties for proven cases of non-compliance will be outlined in the Labor Act, which is currently with the Senate for its opinion, advisor to the NCW Hanan Nazir told Masaa DMC’s Ramy Radwan (watch, runtime: 9:03).

SMART POLICY- Companies need to pay a liveable wage, and if anything, we think the EGP 2.4k line probably isn’t high enough. El Said and her team have handled the minimum wage file with aplomb — we hope they stay the course. Grant as few exceptions as possible. And if a company gets an exemption, it should have to commit to a clear deadline by which it will meet the minimum and pay a living wage.

In addition to the minimum wage, private sector companies will also need to provide periodic raises, for which the NCW has set a minimum threshold of 3% of the social insurable amount (known in most financial departments as “agr ta’meeny”) — which is equivalent to EGP 70 in the case of the new minimum wage.

The wage is inclusive of bonuses, incentives, and other allowances companies give their employees and is not the base amount, El Said told Lamees. The private sector minimum wage is in line with the same floor set for the public sector, which rose to EGP 2.4k from EGP 2k at the beginning of FY2021-2022.

SCZone signs off on Ain Sokhna’s USD 2.6 bn methanol plant: The General Authority for the Suez Canal Economic Zone (SCZone) has signed a land use contract with a company jointly owned by Abu Qir Fertilizers, Helwan Fertilizers, and Al Ahly Capital Holding, to establish a methanol plant at Egypt's Ain Sokhna port and industrial complex, according to a cabinet statement.

The first phase of the plant is expected to be completed in 2025 and cost USD 1.6 bn, while the second and final USD 1 bn phase will take another three years, according to the statement. First announced over the summer, the plant aims to produce 1 mn tons of methanol and 400k tons of ammonia annually, a portion of which will be exported.

The state moves into methanol: Referred to in the cabinet statement as International Methanol Company, the company established by the Oil Ministry to build and run the methanol plant was formed in August under the name Misr Methanol. Abu Qir and Helwan each hold a 35% stake, and Al Ahly Capital holds the remaining 30% stake. The new entrant to Egypt’s petrochemicals industry joins Methanex, which for a decade has been Egypt’s only methanol producer.

Ain Sokhna is on track to become one of the largest petchem complexes in Africa: The SCZone in May signed a USD 7.5 bn agreement with the Red Sea National Refining and Petrochemicals Company to build one of the biggest petrochemical complexes in Africa and the Middle East, also in the Ain Sokhna industrial zone.

OTHER NEWS FROM INDUSTRY-

Oriental Weavers will invest USD 15 mn to upgrade looms and machinery in 2022, the company announced in a press release (pdf).

Turkish UPVC gets anti-dumping duties: The Trade Ministry will impose anti-dumping duties on Turkish imports of unplasticized polyvinyl chloride (UPVC) for a five-year period in a bid to protect the local industry, according to a ministry statement. The decision will come into effect once it’s published in the Official Gazette. UPVC is a building material used in place of wood in things like window frames, sliding doors, drains and plumbing.

Remittances from Egyptians abroad were up 1.5% y-o-y to USD 8.1 bn in the first quarter of FY 2021-2022, the central bank announced in a statement (pdf). The quarterly figure rose despite September being a slow month, with remittances dipping 3% y-o-y to USD 2.6 bn. In August, remittances grew 11.6% y-o-y to USD 2.7 bn.

On the up and up: The 1.5% increase for the first quarter of the state’s fiscal year comes on the back of a steep rise in remittances in the last quarter of FY 2020-2021, when inflows rose almost 30% y-o-y to USD 8.1 bn.

The figures tally with estimates that remittance inflows are on course to hit a record high this year, as higher oil prices and the global economic recovery fuel an increase in transfers, according to a recent World Bank report. Transfers from Egyptians abroad are projected to increase almost 13% to USD 33 bn this year, making Egypt one of the world’s top five recipients of remittances in USD terms, and continuing a trend that saw inflows shrug off the pandemic to register fresh highs last fiscal year. Remittances have been vital over the past two years to make up for the covid-induced slump in foreign direct investment and tourism revenues.

The Sovereign Fund of Egypt (SFE) and Mobica broke ground on two schools in the Cosmic Village, the Planning Ministry announced in a statement yesterday. The schools will be established by the SFE and Mobica and run by GEMS Egypt. No details were given about the costs involved in the project.

What’s the Cosmic Village? The now-closed village sits on a prime piece of real estate spanning 190 acres in Sixth of October city, housing cultural, scientific, and historical zones that are meant to deliver an educational experience. The village includes a planetarium, smaller-scale models of major Egyptian monuments such as the Giza Pyramids and the Citadel of Salaheldin, and models of prehistoric life.

We got a hint that the two schools were coming earlier this year, when a source at GEMS told us the company would collaborate with the SFE on at least two schools in Cosmic Village to redevelop the state asset. At the time, the projects were expected to be open for admission starting September 2023. Yesterday’s announcement is the first we’ve heard of local manufacturer Mobica’s involvement.

Another SFE-private partnership in the Cosmic Village: A joint venture between CIRA and Elsewedy Capital will partner with the SFE to set up another two schools in the Cosmic Village, it was announced last month. The partnership will see EGP 350 mn invested in the project, which will set up a branch of Futures Tech and another branch of Regent British School. The new Cosmic Village schools join a number of slated projects that aim to utilize the PPP model to expand education provision for middle-income families.

The SFE and GEMS are becoming firm friends: The SFE signed an MoU with GEMS to build and operate two national schools in the west of Cairo, each with a capacity of 2.5k students, in March of this year. That same month, the EFG Hermes Education Fund, set up as a 50/50 JV between EFG and GEMS, made its third and final close when the SFE committed EGP 250 mn.

Industry players will weigh in on the long-awaited automotive strategy as the government looks to finalize the incentives package, cabinet said in a statement yesterday. Prime Minister Moustafa Madbouly has previously said the strategy — which aims to grow the domestic auto industry and the sectors that feed it parts, components and services — will be unveiled before the end of the month.

What we know about the strategy so far: Policymakers haven’t been specific about how it would work, benefits to companies, or eligibility requirements. Previous statements signaled that they could include a new value-added rule that would calculate the minimum percentage of local components used in the manufacturing of cars, a quota for annual production volume, provisions for the size and volume of new investment, and environmental sustainability requirements. The strategy could also include incentives for EV production and customs discounts linked to the percentage of locally-produced components.

BACKGROUND: The legislation for the automotive strategy has been in the works since 2016, and has gone through years of delays, revisions and overhauls. The strategy aims to grow a car manufacturing industry that can compete with European Union, Moroccan and Turkish imports.

Suez Canal revenues are up 13% y-o-y, rising to USD 6.1 bn YTD, Suez Canal Authority boss Osama Rabie said, according to a cabinet statement. The waterway recorded USD 5.61 bn in full-year receipts in 2020.

Ever what? The waterway had a record-breaking year in terms of revenues and traffic volumes, with almost 20k ships crossing the canal this year so far, compared to 18k ships in all of last year, with a 5.1% y-o-y increase in annual net tonnage. The performance comes despite the Ever Given crisis that blocked the canal for almost a week in March.

The SCA worked to boost traffic through the canal this year, slashing transit fees for tankers at the end of 2020 and some container ships at the beginning of July, while transit fees for all ships were frozen at 2020 rates.

A total of 400k qualified individuals have been contacted to receive their booster shots, Health Ministry spokesperson Hossam Abdel Ghaffar said in a phone-in to Al Hadath Al Youm (watch, runtime: 5:40). The ministry is currently only providing booster shots to medical staff and senior citizens with chronic medical conditions who completed their regular vaccine dose at least six months ago.

The Health Ministry reported 848 new covid-19 infections yesterday, down from 903 the day before. Egypt has now disclosed a total of confirmed cases of covid-19. The ministry also reported 47 new deaths, bringing the country’s total death toll to 21,457.

Meanwhile, Israel is ready to roll out fourth shots to people above 60, becoming the first nation to take that step, Reuters reports.

The biggest talking point of the evening was the expected introduction of a private sector minimum wage and the thousands of companies who filed for exemptions. We have chapter and verse in this morning’s news well, above.

In second place: The uncertainty over Libya’s upcoming presidential election, which is scheduled to take place this Friday, 24 December despite the full list of nominees not being released as of yet. President Abdel Fattah El Sisi and Foreign Minister Sameh Shoukry sat down with the head of Libya’s Presidential Council Mohamed Al Menfi yesterday to discuss the elections and efforts to complete Libya’s democratic transition. The story earned attention and tidbits of analysis from Kelma Akhira’s Lamees El Hadidi (watch, runtime: 2:14), Masaa DMC’s Ramy Radwan (watch, runtime: 12:03), Yahduth fi Misr’s Sherif Amer (watch, runtime: 3:06), and Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 17:56).

Also on the airwaves last night:

• The fourth wave of covid-19 hasn’t peaked in Egypt yet, presidential health advisor Mohamed Awad Tag Eldin said. (Ahmed Moussa on Ala Mas’ouleety | watch, runtime: 19:42)

Reuters puts the carry trade in focus this morning ahead of a year in which central banks globally are seen as preparing to raise interest rates.

Other stories making headlines on an otherwise fairly unremarkable morning for news:

• The World Bank’s blog features a story on how hooking homes to the natural gas distribution grid is changing lives.
• Gulf Business has picked up Bloomberg’s piece from earlier this week on our drive to assemble EVs here at home.
• South Africa’s Defenseweb reports on Germany’s sale of three Meko A200EN frigates and air defense systems to Egypt.

Construction on 6 BRT stops on the Ring Road is underway: Construction on the first six bus rapid transit (BRT) stops on the Ring Road officially started this week, Transport Minister Kamel El Wazir said, according to Al Mal, without disclosing a timeline for completion or for the construction of the next phases of stops. This comes as work on the BRT lanes in the Middle Ring Road nears completion. The BRT system comes as part of the larger upgrade and expansion of the Ring Road, which intends to widen the freeway, add extensions to ease traffic congestion, and replace more disruptive public transport on the freeway like microbuses.

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

• Egypt’s strategic wheat reserves are sufficient to cover 5.3 months of consumption, while its sugar and vegetable oil reserves will cover 3.5 months and 5.4 months respectively, the Supply Ministry said yesterday.
• The Pyramids Plateau makeover, which includes a new visitor center, new entrances to the Pyramids area, and a redevelopment of the roads in the area, will be opened during the second half of 2022, an official at the Tourism Ministry has said.
• Prime Minister Moustafa Madbouly met with representatives from US-based Honeywell to discuss potential cooperation on recycling initiatives and producing clean fuel for aircrafts ahead of the COP27 summit.

The US State Department has expressed disappointment at Monday’s prison sentence handed to prominent activist Alaa Abdel Fattah, lawyer Mohamed El Baqer, and blogger Mohamed “Oxygen” Ibrahim, but played down the prospect of taking diplomatic action, with spokesperson Ned Price emphasizing the importance of the two countries’ relationship in a press briefing. Price emphasized Egypt’s role in ensuring regional stability, but also noted that “human rights is a topic of discussion” in “just about every senior-level engagement” between the US and the Sisi administration. Foreign Ministry spokesperson Ahmed Hafez said at a press conference with Asharq Al Awsat that it was “not appropriate” for politicians to comment on court rulings.

Sudanese Prime Minister Abdalla Hamdok reportedly intends to step down in the coming hours, Reuters reports, citing sources close to the matter. This comes days after mass protests took place on the anniversary of Sudan’s 2019 uprising, with demonstrators demanding return to civilian rule and protesting the military coup that military chief Abdel Fattah Al Burhan led in October, which saw Hamdok ousted and placed under house arrest for a month. Hamdok had previously said he would only remain in office if he had political support and if the transitional agreement — which called on the military to release political detainees, protect freedom of expression and allow Hamdok to independently appoint a new cabinet — was enforced.

London court orders Dubai ruler to pay mns in divorce settlement + child maintenance to ex-wife: Sheikh Mohammed bin Rashid al-Maktoum was ordered to pay Princess Haya and his two children GBP 554 mn in child maintenance and security costs, reported the Financial Times. The sum is possibly the largest divorce settlement to be awarded by a British court in a high-profile case that has given outsiders a view of the world of the Gulf elite.