Expect your corner koshary and ful shops to be exempt from VAT: The Finance Ministry issued a directive exempting some restaurants that typically serve-lower income groups from charging value-added tax (VAT) on food items served. Not part of this exemption are all franchises of international or domestic restaurants. Restaurants in shopping malls, tourist areas, airports, and gated residential compounds will also have to continue collecting the VAT, according to the directive. Also not exempted are restaurants serving food made from wheat (so no feteer / pizza, then?) or dough-based pastries as well as restaurants that charge their clientele extra for service “or any other charges.” Deputy Finance Minister Amr El Monayer, who had said last week to expect more guidance from the Ministry on the application of VAT, says the exemption comes in line with the social element of tax reform and the state’s policy to protect those least well off. He reiterated that businesses with a turnover of less than EGP 500k a year remain exempt from VAT.

A copy of the Bankruptcy Act is out: A copy of the Bankruptcy Act, which is currently being reviewed by the Council of State (Maglis Al Dawla), has made it to the press. You can view the full text here, courtesy of Al Borsa. The law, which creates a clear regulatory framework for bankruptcy proceedings in the private sector, is part a basket of structural reforms meant to improve Egypt’s business climate and boost investor confidence. By outlining clear steps and guidelines for cases of bankruptcy, the legislation protects heads of failed companies and individuals from debtors prison and a tangle of complex criminal court proceedings. The Council of State expects to conclude its review of the draft act within a month. Among its highlights:

• Economic courts hold sway, will form bankruptcy divisions: Economic courts are the only authority allowed to look into bankruptcy cases and a bankruptcy judge’s ruling will also be considered final and cannot be appealed. Economic courts will effectively create “bankruptcy courts” — departments to handle bankruptcy filings, including mediation, restructuring and settlement procedures.
• Who can file for bankruptcy? A request for bankruptcy can be filed in person by the debtor, by the creditor, or by order of the Prosecutor General’s Office, with a statute of limitations of up to one-year after a person’s death or after retirement.
• It’s not just about liquidation — restructuring is also in the cards: Companies with paid-in capital north of EGP 1 mn can lodge a request to restructure or choose to negotiate a settlement in lieu of declaring bankruptcy before bankruptcy court proceedings begin or a verdict is issued by an economic court in a bankruptcy case.
• Crime and punishment: Cooking the books to declare bankruptcy or fraudulently reaching a settlement or restructuring agreement could result in prison sentences of up to five years and fines up to EGP 500k. Concealing financial records and accounting negligence in bankruptcy cases carries a minimum sentence of six months in prison and up to EGP 200k for the primary perpetrators and board members convicted of the crime.
• The law will be applied retroactively to ongoing cases.

Majid Al Futtaim boss optimistic about Egypt consumer sentiment, not fretting overinflation. Chief Executive Officer Alain Beijani told Bloomberg Television that he’s not concerned about inflation, saying that while Egypt is going through “difficult times,” the nation has a lot to offer. The country is now approaching the “end of the tunnel,” having enacted tough reforms in 2016 and early 2017, he said, and the economy is starting to show signs of turning the corner. On consumer demand: “Egypt has very deep consumer demand. The reality is that there’s still growth in consumer demand. There’s a change in consumption patterns that has been impacted by the [events of the] past two years, that’s absolutely true. It’s also been impacted by the change in offerings in the market given the restrictions on imports that were there, primarily driven by the lack of foreign currency. I would say that Egyptian consumer demand is still good. We’re seeing more and more tourism coming into Egypt. In the last month we’ve seen some very good news in that respect. So overall we’re positive on the outlook.” Outside Egypt, the Dubai-based Beijani says, MAF is looking to grow in the GCC and has entered Kenya this year. Majid Al Futtaim recently opened its flagship Mall of Egypt in Six of October. Watch the full Bloomberg interview(runtime: 4:05)

Shake up at Careem? Wael El Fakharany has stepped down as managing director of Careem Egypt and the ridesharing company’s SVP for government relations, sources told Al Mal. We have independently confirmed the news of El Fakharany’s departure. Separately, Careem announced appointing Ramy Kato as its head of operations in Egypt in addition to his current role as VP of Careem Care. “Kato will be responsible for managing all Careem operations in Egypt including overlooking Careem’s expansion plans in the local market, government relations and day-to- day business operations.”

Head of SME unit at unnamed bank nabbed by top anti-corruption cops: The Administrative Control Authority (ACA), Egypt’s top anti-corruption agency, has reportedly arrested the head of SME banking at an unnamed bank. The individual was arrested along with an unspecified number of accomplices for allegedly accepting a total of EGP 2 mn in bribes to grant loans on falsified paper under the central bank’s SME lending initiative, Al Shorouk reports. The ACA claims borrowers claimed some EGP 25 mn in fraudulently obtained loans from the EGP 200 bn initiative, which offers subsidized interest rates to borrowers.

M&A WATCH- Ayman Mamdouh Abbas is planning on increasing the stake of CI Capital he is proposing to buy to 4.5% from 2%, according to Al Mal. A consortium of investors had offered to buy 71.94% of CI Capital in December and EFSA greenlight some of the investors’ bids. Two investors had reportedly backed out of the agreement. Abbas says he received approval from CIB, CI Capital’s parent, to acquire a larger stake. He adds that this increase would not require him to be approved again by EFSA as it would still keep his bid below the 5% threshold that EFSA Chairman Sherif Samy said would require obtaining approvals de novo.

EFG Hermes subsidiary finalizes Pakistan brokerage majority stake acquisition: EFG Hermes Frontier Holding, a wholly-owned subsidiary of EFG Hermes, has finalized the acquisition of a 51% stake in Pakistani brokerage Invest and Finance Securities Limited. The transaction, agreed to in August, was closed at a price of PKR 15 per share for a total of PKR 153.12 mn (c. USD 1.46 mn).

IPO WATCH- Law firm Zaki Hashem & Partners has filed a formal request on behalf of MM Group for Industry and International Trade to float 30% of its shares on the EGX at EGP 6.06 per share, firm partner Helal El Hossary tells Al Borsa. The Group’s is one of six capital raisings that could go forward in the first half of 2017. As we noted last month, Beltone Financial will be managing the offering, which will see 80-85% earmarked for institutional investors, with the balance comprising a retail offering to local investors. The Egyptian Financial Supervisory Authority had approved a fair value assessment for MM Group at EGP 6.75 per share.

Abou Hashima to IPO Egyptian Media Group? The Egyptian Media Group, controlled by Ahmed Abou Hashima, is planning an initial public offering, according to FEP Capital CEO Abdullah Al-Shaheen, who stopped short of specifying a timeline for transaction, Youm7 reports. FEP Capital is advising EMG on the planned listing. Al-Shaheen also said FEP plans to invest EGP 250 mn in SMEs and distressed manufacturers over the next two years, according to Al Borsa. FEP Capital had pledged in 2015 to invest a total of EGP 500 mn and has made good on half of that amount over the past two years, the newspaper says.

AUC has to collect tuition fees fully in EGP, the administrative court ordered, according to Al Shorouk. Payment of tuition fees cannot include foreign currency, the court added. Al Shorouk notes that AUC has been collecting half of the tuition fees in USD and the other half in EGP since 2014. As far as the piece notes, it is not clear if the court decision places any restriction on charging the tuition fees in EGP equivalent of a USD amount. We believe AUC has the right to appeal the decision.

Is Amazon looking to open an export logistics center in Egypt? A number of Egyptian companies are in talks with e-commerce behemoth Amazon to become part of an Egypt logistics center that could connect Egypt to Amazon’s global network. Mintra Paper Industries CEO Hany Casis tells Al Borsa that Amazon had said that Amazon will “soon” be in touch with the Egyptian government about establishing a distribution center and could have staff here for talks in “two to three weeks.” Amazon will be looking to contract three companies to handle the flow of some USD 1 bn in products from Egypt to the US and Europe, Casis said. The former chairperson of Egyptian-American Business Council added that his company, Mintra, has already closed an agreement to supply Amazon. The news comes as Amazon has reportedly jump-started talks to acquire Souq.com for USD 650 mn.

** EARNINGS WATCH: Cleopatra Hospitals Group announced net income of EGP 89.4 mn in 2016, up 73% y-o-y. Revenues increased by 16% y-o-y to EGP 864.4 mn during the year. The largest contributor to group revenues was Cleopatra Hospital at (44%), followed by Cairo Specialised Hospital (21%), Nile Badrawi Hospital (18%) and Al Shorouk Hospital (17%). Acquisitions are in the pipeline: Company CEO Ahmed Ezzeldin noted: “Our Group today is better positioned and better prepared to start the next chapter of growth characterized by a follow through on our commitment to a value accretive capital investment program. We are currently conducting due diligence on a potential accretive fifth hospital acquisition in Cairo which we expect to announce in 1H 2017. We are also reviewing a number of brownfield acquisitions to further expand our footprint.”

Etisalat Misr’s revenue in 2016 came in at AED 4.03 bn (USD 1.10 bn), falling 11% y-o-y due to “unfavourable exchange rate movements.” In EGP terms, Etisalat Misr’s top line rose 8% y-o-y on growth in the data segment and subscriber base. Etisalat Misr’s EBITDA for 2016 was AED 1.6 bn (USD 435.6 mn), with an EBITDA margin of 39%, 2 ppt higher than 2015’s. The results were disclosed as its Dubai-based parent, Etisalat, recorded net profit after federal royalty of AED 8.42 bn (USD 2.29 bn) in 2016, with total consolidated revenues coming in at AED 52.36 bn (USD 14.26 bn), according to the company’s consolidated earnings release.

MOVES- Bank of Alexandria announced the appointment of Hassan Ghanem as executive board member and Sherif Lokman as head of retail and small business.

Proposed Investment Act comes under fire during House committee hearing: Abla Abdel Latif, head of the President’s Economic Development Council, and Egyptian Competition Authority chief Mona El Garf leveled criticism at the Investment Act in testimony before the House Economic Committee yesterday, Al Shorouk reports. Abdel Latif said the bill alone is not enough to promote investment and needs a bundle of complementary legislation, including the Industrial Permits Act, to be issued in tandem. Meanwhile, El Garf is reported to have said that the draft of the act is too lengthy and diverges from the one approved by the Council of State (Maglis Al Dawla). According to El Garf, the sheer volume of clauses in the bill makes it difficult for investors to understand their rights and obligations. Businessman Amr El Lamei took the discussion back to square one, saying the issues with the original investment law were not made clear, and suggested that the House return the legislation to the Investment Ministry. The House Economic Committee had granted the bill preliminary approval last month. The House as a whole is expected to vote on the bill this month.

Contractors are losing their minds over what they see as “delays” in the House of Representatives passing a bill meant to compensate them for losses on government contracts incurred as a result of the float of the EGP. The bill — the text of which we are yet to see — would presumably allow the government to revise contracts to reflect the new cost base backing. Cue much whining from the sector, along with promises of at least one “urgent meeting” today. Al Borsa says. Both the House and the government are keen on issuing the bill as fast as possible, on legislator promises Al Shorouk, adding that the final draft should be coming to a vote in a plenary session “within days.” Local media reports last week said that the House would vote on the bill on Monday 13 March.

The population of Greater Cairo is set to grow by 500,000 in 2017, more than any other major city in the world, Reuters’ Arwa Gaballa reports, citing a Euromonitor International report. Greater Cairo, a metropolitan area including Cairo and parts of the Giza and Qalyubia provinces, is home to some 22.8 mn currently, Gaballa notes. A top Housing Ministry official says the government is building 17,000-18,000 homes in the New Administrative Capital and will put them on sale in April to help absorb the flow, adding that the government is also “working on developing areas in northern and southern Egypt.”