IMF downgrades 2019 global growth outlook to 3%: The global economy is in a “synchronized slowdown,” IMF Chief Economist Gita Gopinath said in the fund’s latest World Economic Outlook (pdf), which has again downgraded its 2019 growth projections to 3.0% from 3.3% in its April report. Growth is expected to rebound slightly in 2020 to 3.4%, albeit at a slower rate than the 3.6% forecast in April. The IMF attributes the downgrade to a “geographically broad-based” slump in manufacturing and global trade, driven by an increase in tariffs and a contraction in the auto sector caused in part by new emission standards in the Eurozone and China. The latest outlook was released to coincide with the annual meetings of the IMF and the World Bank, which are taking place this week in Washington, DC.

Stimulus in advanced economies and emerging markets has helped mitigate the impact of economic headwinds, including the persistence in US-China trade tensions, which alone could be responsible for shaving 0.8% off global growth in 2020. Without this, we could have instead been looking at just 2.5% growth this year and 2.9% in 2020, Gopinath says.

The problem remains in advanced economies, which are expected to see growth plateau at 1.7% this year and the next. Emerging markets and developing economies will pick up the slack, seeing growth accelerate from 3.9% this year to 4.2% in 2020. “About half of this is driven by recoveries or shallower recessions in stressed emerging markets, such as Turkey, Argentina, and Iran, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, Mexico, India, Russia, and Saudi Arabia,” the report says.

What are the forecasts for Egypt? Growth is forecast at 5.5% in 2019, 5.9% in 2020, and 6.0% in 2024. The current account deficit is expected to rise to 3.1% in 2019 before easing to 2.8% in 2020. Meanwhile, the IMF sees inflation rising back to 9.4% by the end of 2019, before falling back to 8.7% by the end of 2020.

How does this square with the IMF’s projections in July? Making a direct comparison between the latest outlook and the forecast given in the fund’s most recent economic review is tricky, given that it uses calendar years for the outlook and fiscal years for the review. Nevertheless, there doesn’t seem to have been a drastic change in thinking over the past three months: the IMF predicted Egypt’s GDP would grow 5.9% during the current fiscal year and see inflation reaching 9.6% by the end of the year in June 2020.

The IMF wants to agree a post-loan program with Egypt to help it continue on its reform path, Managing Director Kristalina Georgieva told Prime Minister Moustafa Madbouly on the sidelines of the meetings yesterday, according to a cabinet statement. She highlighted the need for continued reform of the lower levels of government, and urged Madbouly to continue developing the country’s human capital. The government was originally looking to secure a non-loan agreement by the end of this month, but the IMF refused to open talks until the current program had finished.

FinMin approves plan to kill capital gains tax on EGX trades, cut stamp tax by a third: The Finance Ministry has “preliminarily approved” proposals to scrap plans to introduce a capital gains tax on EGX trades and to slash by as much as one third the stamp tax on EGX trades, Egyptian Capital Markets Association (ECMA) President Mohamed Maher said, according to Al Mal. The ECMA made the proposal to “reduce the tax burden on investors,” he said, and the ideal now moves to cabinet for review. If signed off by the ministers, it would then require approval by the House of Representatives before becoming law.

A big tax cut for investors: The plans as disclosed by Al Mal would, if accurate, lower stamp tax to 0.1% from 0.15% for resident and non-resident investors alike. What’s more:

• Resident investors who lose on an investment in any one publicly traded company in a given tax year would be refunded their stamp tax;
• Same-day transactions by resident and non-resident investors would be exempt from stamp tax;
• The central clearing house MCDR would walk back through transactions each year and refund stamp taxes paid to any investor found to have paid stamp taxes worth more than 10% of their realized profits for the year (we’re really not clear on the mechanism here and will be looking for more detail).

Background: The government planned to impose a 10% capital gains tax in May 2020 covergin gains made trading EGX shares. The proposal had been “temporarily” shelved in 2017 shortly after having been introduced, but was expected to come into effect in 2020 at the recommendation of the IMF. Back in 2017, the tax was put aside in favor of a provisional 0.125% stamp tax on trades that was scheduled to rise to 0.15% and 0.175% over a three-year-period. Parliament, however, voted at the end of the last legislative session to leave the tax unchanged at 0.15%.

Three bidders for 10% stake + management rights to Heliopolis Housing and Development. Three unnamed companies have submitted bids to acquire a 10% stake in state-owned Heliopolis Housing and Development (HHD) in the company before the Monday deadline, an unnamed source close to the matter said, according to Al Mal. The winning company would also take management rights to the outfit. Eight companies were reported to initially by interested in the company, including our friends at SODIC an EFG Hermes as well as private equity firm BPE, Emaar Misr, and Orascom Development Egypt (ODE).

What’s the attraction? HHD has a large, well-located, dispute-free land bank — and faces no mandatory development schedule for the mns of sqm it controls. It also has a history of partnering with the private sector, having announced (pdf) back in 2016 (for example) that it was that it was co-developing with SODIC a 655 acre plot.

Could the deadline be extended? A number of companies that failed to submit bids by the Monday deadline are still interested and want the deadline to be extended, Al Mal’s source said. Local firms are reportedly trying to form alliances with international companies, which caused them to miss the deadline. A company committee met yesterday to discuss the bids, but there is no word as of yet on whether they will agree a new deadline.

This could delay the process. HHD was originally scheduled to compile a shortlist of companies by mid-November before going ahead with a final round in December. And remember, it’s not just about the 10%: Public Enterprises Minister Hisham Tawfik suggested last month that the 10% stake on offer was part of a wider plan to offer for sale a 25% stake in HHD.

Background: HHD had invited earlier this month private investors to bid for a 10% stake with management rights after earlier backing away from a secondary stake sale of as much as 32.25% originally slated for mid-year, with the offering appeared to be scrappedin April. Plans were then resurrected in July to offer a 25% stake in 4Q2019, before Tawfik told us that the transaction was unlikely to close this year.

M&A WATCH- Is a United Pharma acquisition finally going to materialize? EFG Hermes-owned RX Health Care Fund is expected to sign a final agreement to acquire 80% of United Pharma in a transaction worth more than EGP 366 mn by the end of the month, sources close to the transaction told the local press. If the transaction goes through, United Pharma is expected also executed an EGP 100 mn capital increase through a rights issue to shareholders, which would then see RX’s stake in the company rise to 85%. All proceeds from the acquisition and subsequent capital increase will be used to expand United Pharma’s production facility, including adding new production lines and manufacturing new products.

Background: United Pharma has nearly beens old a number of times in the past two years. In January 2018, it rejected ACDIMA’s EGP 320 mn offer on the grounds that it undervalued the company, which it estimated at EGP 600 mn. A year earlier, three Saudi and local investors also made an offer for 100% of the company, which United Pharma refused because it did not want to sell it entirely.

LEGISLATION WATCH- House committee to consult on speeding up customs clearance: The House of Representatives’ Budget Committee will consult with 23 organizations that work with the Customs Authority on customs clearance to speed up the process, House Rep Mervat Alexan tells Al Mal. Representatives will be asked their opinions on legislating a specific time period for customs clearance in an effort to reduce delays. The debate comes as legislators consider a package of proposed amendments that promise to expedite customs clearance, create a “whitelist” of trusted importers, and broaden the discretion of the Customs Authority.

It’s not clear whether setting a time will do anything to quicken the process. Alexan intimated that the reason for the delays stem from the sheer number of organizations involved in customs clearance, suggesting that what really needs to be done to simplify the process is to reduce the number of cooks making the figurative broth.

Background: The measures made it to the House of Representatives at the end of the last legislative cycle which wrapped up in July. The House is set to vote on the amendments during the current legislative session.

Zohr natgas production to exceed 3 bcf/d this month: Production from the 13 wells at the giant Zohr natural gas field is expected to surpass 3 bcf/d by the end of October, up from 2.7 bcf/d in August, Eni IEOC JV boss Luca De Caro said on the sidelines of the Mediterranean Offshore Conference in Alexandria, the Oil Ministry said in a statement. Eni originally estimated that production would peak at 2.7 bcf/d, but the ministry said earlier this year that output would rise above 3 bcf/d in 2019.

More wells on the horizon: Eni plans to drill 11 exploration wells in the Nile Delta, Western Desert and the Gulf of Suez regions this year and nine other wells in the coming year, De Caro said. Eni has also been producing 1.2 bcf/d of natural gas from its Nooros gas field since the end of 2017 when the two phases of the project were completed. High profile representatives from BP, Wintershall DEA, Shell and Edison also attended the conference, which kicked off yesterday.

South African mobile network operator Helios Towers debuted its shares on the London Stock Exchange yesterday, with the IPO reeling in GBP 288 mn (USD 250 mn) in proceeds, according to joint bookrunner EFG Hermes. The final share price for the telecom firm’s IPO was set at GBP 1.15. The company’s share price rose a little over 4% on its first day of trading, Reuters reports.

Advisors: BofA Merrill Lynch, Jefferies International Limited, and the Standard Bank of South Africa Limited acted as joint global coordinators and bookrunners. Renaissance Capital also acted as joint bookrunner, alongside EFG.

STARTUP WATCH- Halan seeks Series B funding for B2B and B2C expansion: Cairo-based tuk-tuk and motorcycle ride-hailing startup Halan is planning to use the funding it receives from its ongoing series B round to expand both its B2C and B2B offerings, including on-demand logistics, courier services, direct sales, payments, and peer-to-peer delivery, co-founder Mounir Nakhla told Disrupt Africa. No details have been provided thus far on the amount Halan expects to raise from the funding round. The company plans to use these funds to become fully operational in Ethiopia by the end of 2019, with an eye to become pan-African. Halan currently operates in 20-25 cities in Egypt and Sudan, and completes several mn rides per month, almost half a mn of which are in food delivery.

Egypt rose five places to #49 on Brand Finance’s 2019 Nations Brand report, making us the fifth fastest-growing national brand in the world this year. Global powerhouses USA, China, and Germany maintained the top three places, while Japan overtook the UK to rank fourth, according to the report (pdf). The ranking measures country brand value based on data sets from three key areas — goods and services, investment climate, and society and social institutions — and then scores each area based on its constituent elements to determine a grade letter for overall brand strength.

Regional trend, weak performance, strong prospects: The UAE and Saudi Arabia were the region’s top performers, ranking 20th and 21st, respectively. The Emiratis also claimed the sixth spot worldwide in country brand strength. Elevent of the 20 fastest-growing nation brands were from the Middle East and Africa, with Ghana’s brand gaining the most regionally and globally in 2019 (67%).

MOVES- Mohamed Abbas Fayed is set to assume his position as CEO of First Abu Dhabi Bank – Egypt (FAB) by early November, he told Al Mal. Fayed had resigned as CEO and managing director of Bank Audi at the end of April after four years in the Lebanese bank. The former Banque Misr executive will replace Ahmed Ismail Hassan.