VAT applies to leases for retail outlets, education and health centers: The Finance Ministry imposed yesterday the value-added tax (VAT) on leases of retail space from malls, hotels, resorts, sporting clubs, and factories, as well as spaces leased out for use as educational or health centers, Al Mal reports. The controversial move, which had gained the ire of the real estate sector the Federation of Egyptian Industries, came as these groups have alleged that the move violates the VAT Act, which exempts rentals from the 14% tax.

Peugeot Citroen reportedly ending its 41-year partnership with CDCM; Mansour Group said to be closing in for the rebound : The Peugeot-Citroen arm of Groupe PSA has reportedly decided not to renew its distribution agreement with Cairo For Development and Cars Manufacturing (CDCM), its licensed distributor of Peugeot vehicles in Egypt for the last 41 years, Al Borsa reports. The move had apparently caught CDCM and its parent company, Arabia Investments, Development and Financial Investment Holding Company (AIND), off guard. AIND’s head of investor relations Hisham Ismail tells the newspaper that they are still trying to contact the French car manufacturer as to why it had terminated the contract, adding that the move had indeed been a surprise. Ismail added that AIND “will take legal action to preserve its rights and protect the interests of shareholders.” Other sources at CDCM, speaking anonymously, said the company had just placed orders for more cars.

This comes as Mansour Group representatives had apparently been in talks to become the licensed Peugeot Citroen distributor after parent company Groupe PSA acquired Opel back in March, Mansour officials tell the newspaper. Mansour reportedly faced competition from Al Futtaim, Ezz Al Arab, MTI Group, and others. Sources added that Peugeot Citroen is expected to make an announcement of its decision before the end of the year.

Attacking the proposed Automotive Directive from another angle: The story comes amid complaints by some in the automotive sector that Egypt’s trade liberalization pact with the European Union, which gradually eliminated customs on car imports, has not led to a decrease in prices. (Shocking in a post-float environment, right?) Sticker prices on EU imports have shot up by as much as EGP 100K for some brands, said industry expert Raafat Masrooga, member of the Automotive Marketing Information Council, according to Al Mal. The solution, he says? Don’t grow domestic industry by granting local manufacturers incentives to move up the value chain to manufacturing. Nope. The genius believes the Finance Ministry should simply eliminate customs and tariffs on all car imports. All that’s missing from the story is the bright shiny sticker announcing it was paid for by the nation’s CBU importers.

M&A WATCH- Archer Daniels Midland (ADM) will give up its bid for the National Company for Maize Products (NCMP) now that the deadline for it to submit a counter offer has expired, Salah Tawfik, CEO of ADM’s Egypt subsidiary Medsofts, tells Al Mal. The Financial Regulatory Authority (FRA) had rejected at least two bids from ADM to acquire the NCMP, choosing instead to accept Cairo Three A’s offer of EGP 51 per share. NCMP shareholders Misr Capital Investments and National Bank of Egypt said they will accept Cairo Three A’s offer, prompting ADM to ask its legal counsel, Shahid Law, to file a formal inquiry into the rejection, which the FRA did not justify.

Renaissance Capital has a pipeline of investment banking transactions in Cairo, Ksenia Galouchko writes for Bloomberg. “A lot of the global investment banks are de-risking their portfolios, they’re scaling back in Africa and none of them are entering Egypt … Egypt is a very interesting market for us,” RenCap’s global head of investment banking James Friel says. The investment bank, owned by Russian billionaire Mikhail Prokhorov, is taking a long-term bet on Egypt as Friel explains “we have taken a long-term view on the Egyptian market and remain firmly convinced that this is a positive move for the firm.” RenCap got its license in Egypt earlier this year; its new Cairo — headed by CI Capital veteran Mohamed Younes as country boss — will focus on investment banking, financing, and research.

El Sewedy Electric in talks to build six wind power stations: El Sewedy Electric is in talks with French utility company EDF to co-establish a service center for electrical power stations, CEO Ahmed El Sewedy tells Al Mal. The company is also in talks with Egypt’s Electricity Ministry to acquire land on a right-to-use-basis for 25 years to build six wind-powered stations with a combined capacity of 100 MW under an IPP framework. El Sewedy and EDF are part of a consortium bidding for the management and maintenance contract for the three Siemens combined-cycle power plant at the new capital, Burullus and Beni Suef, which should take place next month. Siemens, Germany’s STEAG GmbH, an Orascom-ADERA Energy consortium are among the other suitors. El Sewedy is also gearing up to start an ambitious expansion plan that sees it establishing three new industrial zones in Egypt and six logistical warehouses in different African countries over the next five years.

LEGISLATION WATCH- The House of Representatives’ Health Committee has given its approval to the Universal Healthcare Act — the government’s EGP 600 bn plan to expand quality government-sponsored healthcare coverage nationwide, Health Minister Ahmed Rady announced on Sunday, according to Al Shorouk. The bill, a key piece of social welfare policy for the Ismail cabinet, passed with minimal opposition, with most MPs objecting to the 15-year timeline to fully implement the act nationwide. Rady told the committee at a hearing yesterday that actuarial studies for the bill had projected that implementing the plan on a shorter timeline would lead to financial ruin. We assume that the bill will soon reach a plenary session of the House for a vote.

Financing and implications for business: As we noted last week, the bill, which will be managed by three regulators, would impose premiums for employers of 4% of each employee’s monthly salary, while employees will pay premiums of only 1% of their salary into the system. It will be partly funded through these premiums as well as fees imposed on private sector healthcare operators and a 10% sin tax on tobacco sales. The government has also been talking about rolling into the bill a mechanism of imposing price caps on private healthcare providers; prices are expected to be set early next year.

Absentee MPs delay voting on key legislation, again: Unconcerned that there is a country to be governed, absentee MPs have caused votes on notable bills in plenary sessions of the House to be delayed — the most important of these being the Youth Institutions Act, which bans political activity in public youth clubs; the ban on drones; and most importantly, the controversial Labor Unions Act, Al Ahram reports. The latter once again received condemnation from the Egyptian Federation of Independent Unions, which claims the law constricts collective bargaining activity, according to Al Mal.

What our illustrious representatives did manage to do, however, was to sign off on a EUR 290 mn loan agreement with the European Bank for Reconstruction and Development (EBRD) meant to fund the purchase of 100 new locomotives for the Egyptian National Railway, Al Masry Al Youm reports. A number of MPs objected to the loan agreement, pointing out that it doesn’t specify an interest rate. Some MPs also caviled that fleet upgrades were taking priority over infrastructure development (‘cause apparently fleets aren’t key components of infrastructure in their little world).

The CBE has reportedly approved raising caps on cash withdrawals and deposits via mobile cash transfer services, Vodafone Egypt Sales Director Karim Shehata announced in a press conference on Sunday, according to Al Mal. The daily transaction limit was raised to EGP 10,000 from EGP 5,000, while the monthly limit was raised to EGP 50,000, according to Egypt Today. The move, part of the CBE’s drive to increase mobile banking and electronic payments systems, will help expand services such as Vodafone Cash, whose clients now number 3 mn users, said Shehata. The announcement came at the signing of an agreement between Vodafone Cash and the Bank of Alexandria to facilitate online payments through the service. So far as we can tell, the Central Bank of Egypt has yet to confirm the news.

Is the World Bank telling us to get a sovereign wealth fund of our own? World Bank Group Senior Vice President Mahmoud Mohieldin reportedly suggested that it “was imperative” for Egypt to benefit from the revenues of the Zohr gasfield by establishing a sovereign wealth fund, Al Ahram reports. Mohieldin’s comments came at an AmCham talk held yesterday. Last we heard on the Ismail cabinet’s plans to form such a fund was in November of last year, with the economic group approving the drafting of a law to establish a EGP 5 bn sovereign fund dubbed Amlak. Ashraf Al Araby, the planning minister at the time, had even narrowed down the sectors the fund would be investing in, including industry, agriculture, mining, and tourism. Al Araby had been the sole voice behind the move, and we haven’t heard peep about it since he was replaced in the last cabinet shuffle.

EARNINGS WATCH- Cleopatra Hospitals Group’s net profit rose 45% y-o-y to EGP 32 mn in 3Q2017, the company said in its earnings release issued overnight (pdf). Revenues came in 38% higher y-o-y at EGP 293.2 mn, “driven by both higher patient volumes and improved pricing.” Cleopatra Hospital was the largest contributor to Group revenues for the quarter with 43% of the total, followed by Cairo Specialised Hospital with 22%, Nile Badrawi with 18%, and Al Shorouk with 17%. “The quarter just ended saw us extract higher value from services across the board while staying true to our commitment to focus on patient safety and quality of outcomes,” Group CEO Ahmed Ezzeldin said.

Acquisitions in the offing: “In parallel, we continue to make headway in our expansion strategy; several platform additions to expand our network are soon to reach financial close or are in advanced due diligence stages,” Ezzeldin added.

DP World says small businesses will be “at the heart of its new industrial and residential zone in Egypt’s Sokhna,” according to The National. The port operator signed an agreement at the World Youth Forum earlier this month with the Suez Canal Economic Zone (SCZone) to develop the 95k sqm Sokhna World Zone, which will offer incentives to businesses in a wide range of fields, including auto parts, textile, and medical equipment. The zone, which will also house up to 500k citizens, will be developed under a joint venture that will be 51% owned by the SCZone, with DP World holding the balance.

Kuwait Economic Development fund to contribute EGP 1 bn to Sinai development projects: Investment Minister Sahar Nasr signed two agreements worth EGP 1 bn (KWD 17.5 mn) with the Kuwait Fund for Arab Economic Development yesterday to support development projects in North Sinai, a ministry statement says. Under the first agreement, KWD 12.5 mn will be allocated to establishing and developing infrastructure for drinking water in El Arish under the government’s development strategy for the Sinai Peninsula. The second agreement will see KWD 5 mn allocated to the reclamation of 400 feddans in North Sinai for agriculture and farming. The new agreements are part of the Kuwaiti fund’s financing framework for development projects in the Sinai, which will see it provide some USD 900 mn in funding over the course of three years.

Nasr also discussed cooperation with Romania’s Business, Trade, and Entrepreneurship Minister Ilan Laufer yesterday. The two officials agreed to bring into effect four MoUs that had been signed during Nasr’s visits to Romania in July on collaboration agriculture-focused investments and SME development. Egypt and Romania had also inked agreements in August on tourism promotion and scrapping visa requirements for diplomats.

Egypt apparently has the 40th best international image in the world, beating out all other Arab countries in the latest survey by the Nation Brands Index. The survey measures how people view a country across six categories: governance, people, tourism, culture and heritage, investment and immigration, and exports.

Zimbabwe’s Robert Mugabe refused to resign on Sunday, but “instead delivered a meandering speech on state television that made clear the 93-year-old leader has no plans to leave power,” the Washington Post reports. Earlier in the day, Mugabe’s own ZANU-PF had dismissed him from the party, warning him to resign by noon on Monday or face impeachment. Mugabe, who is currently under house arrest, said however that matters would be settled in next month’s party congress, prompting questions over whether “he is showing signs of senility” or “displaying the same shrewd, stubborn ability to defy his critics that has kept him afloat for decades.”

Mugabe’s story reminds the Council of Foreign Relations’ Elliott Abrams of Hosni Mubarak. But while Mubarak tried to pass the torch to his son, Mugabe’s downfall came as he tried to position his wife as his successor.

Other international stories of note:

Germany heading for new elections? We won’t say Angela Merkel is one of our peeps, but Germany has been a reliable partner for Egypt on the security and economy fronts like, so color us interested that her bid to form a new government has failed, opening the door to new elections if she can’t cobble together a coalition. Bloomberg has the story.

We’re still trying to get our heads around the notion that Norway’s sovereign wealth fund could sell off USD 35 bn in oil and natural gas stocks, giving a boost to the folks fighting climate change.