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Monday, 11 October 2021

THIS MORNING: There’s growing pushback against the CGT + look for the energy crisis and IMF / World Bank meetings to dominate headlines this week

Good morning, wonderful people, and welcome a busy Monday morning on which we have plenty to digest as inflation hits a 20-month high, the World Bank bumps up our post-covid growth forecast, and opposition to a tax on the gains of domestic EGX investors seems to be gaining steam.

And before we get started: A very Happy Thanksgiving to our Canadian readers. We’re thankful this morning for all of you — the readers who choose to start their mornings with us each workday. Thank you, one and all, for making it possible for us to do what we do.

There are signs of growing pushback against the capital gains tax on EGX gains: Al Ahly Financial Investments Management’s managing director and chief investment officer, Adel Kamel Al-Wali, is the latest to speak out against the 10% capital gains tax. The forthcoming tax is the biggest problem facing Egyptian fund managers, Al-Wali told Al Mal, calling on the Madbouly government to again consider scrapping it.

Background: Al-Wali’s comments come after figures from the securities industry and a group of 20 MPs voiced their concerns about the timing of introducing the capital gains tax, asking for it to be (once again) postponed, replaced with another levy, or scrapped entirely to protect a still-recovering EGX. A related drive could put the tax on the agenda of the House Planning and Budget Committee.

The worry is that the new tax will further depress the (already sluggish) bourse: Investors will be encouraged to buy equities as long as taxes remain low, Al Wali said, pointing to low trading volumes as well as the EGX’s poor performance compared to regional peers. On the plus side, he noted that the EGX’s sluggish performance means stocks across all sectors are undervalued, making them attractive to investors. The EGX30 is currently down 1.7% YTD.

What’s the CGT? The 10% tithe would hit the net realized portfolio gains each tax year of domestic investors on the EGX. Foreign investors would be exempt. After years of delays, Finance Minister Mohamed Maait has said the tax will come into effect on 1 January 2022.

THE BIG STORY ABROAD- The global business press is setting up three big stories that look set to dominate headlines this week. They are:

#1- The IMF and World Bank’s annual meetings get underway in Washington, DC, later today — and it’s make-or-break time for IMF boss Kristlina Georgieva. She stands accused of pushing staff to fudge data to make China look better in the IMF’s once-flagship Doing Business report. The US and Japan want her out, the Financial Times reports, while France, Germany, Italy and the UK are more supportive, effectively splitting the 24-member executive board of the organization in two.

Also this week: G20 finance ministers and central bank governors will meet in DC during the IMF / World Bank fall meetings.

#2- The brewing global energy crisis is deepening — and has created new room for maneuver for some countries — including Russia, which is sending not-so-subtle signals to the rest of Europe that the EU could avoid a long cold winter … if only it would bring Russia in from the cold. The news comes as energy-intensive manufacturers in the UK have warned they could have to shut down production if they don’t get help with energy prices. Industries feeling the pinch include producers of steel, glass, ceramics and paper. Closer to home, Lebanon has restored power supply to much of the country after earlier running out of fuel — and India’s coal ministry says the country has “ample coal stocks to meet demand from the power industry.

#3- It’s also a big week for market confidence in developed economies as investors fret over the risk that inflation isn’t just rising, but here to stay for a while. Third quarter earnings season kicks off in the US of A this week, and market sentiment will be significantly shaped by “what companies reveal about the impact of any supply-chain problems, labor shortages and the continuing pandemic,” the Wall Street Journal writes.


** IN CASE YOU MISSED IT- Stories from yesterday’s edition of EnterprisePM:

  • Inflation continues to be the big worry abroad as continued supply chain disruptions are driving policy makers and analysts to conclude that inflation is set to continue.
  • Reducing cows’ farts and burps to save the planet: Farmers and biotech companies are coming up with ways to cut down on methane emissions from cows — one of the planet’s biggest emitters.
  • Let’s take this offline: Per My Last Email by Stephanie K. Wright translates all the passive-aggressive phrases commonly used in corporate emails and raises questions about the most prevalent means of communication in the business world.

CORRECTION- We picked up a report by Al Shorouk yesterday claiming that real estate developer Mountain View is in talks with Banque Misr and AAIB for an EGP 5 bn facility. We have been informed by a representative of Mountain View that AAIB is not part of the talks. The story has been corrected on our website.

CIRCLE YOUR CALENDAR-

Conference season ratchets up this month, with a number of exhibitions and business events here and throughout the region taking place this week, including:

  • The Turathna Exhibition at the Egypt International Exhibition Center, Cairo, and will run until Friday, 15 October.
  • The two-day Mediterranean Offshore Conference will take place in Alexandria tomorrow.
  • Further down the road: The Middle East Angel Investment Network is hosting its Angel Oasis in El Gouna on 27-29 October, with separate pricing for in-person and virtual attendance.

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

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*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Egypt’s universities are showing strong improvements this year, according to some of the most respected global ranking systems. They’re among the fastest-rising higher education institutions in the world out of all those tracked and ranked by the Times Higher Education (THE), well represented in both the THE World University Rankings and the newly-inaugurated THE Arab University Rankings. This year’s QS World University Rankings also includes more Egyptian unis — along with, notably, a stronger performance from private universities. We take a look at what’s driving the improved rankings across the board.

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. © 2022 Enterprise Ventures LLC.

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