IMF’s USD 2.8 bn pandemic aid lands in Cairo: Egypt took receipt of the IMF’s USD 2.8 bn rapid financing instrument yesterday, only a day after the fund’s executive board gave its approval, state news agency MENA reported, quoting an unnamed central bank official. The facility will support the country’s balance of payments and be used for “targeted and temporary spending” to help the country grapple with the covid-19 pandemic that has ground the tourism sector to a halt and caused an exodus of foreign capital.

Talks for more funding underway: Talks were scheduled to kick off yesterday for a separate stand-by arrangement (SBA) that could see us receive an additional USD 4.5-5 bn, Vice Minister of Finance Ahmed Kouchouk said on Monday. How much we end up receiving in SBA funding will depend on the IMF”s assessment of our needs, ability to repay and track record with the fund.

The wheat season in the northern hemisphere will be a godsend for food security in Egypt: Egypt’s wheat imports could pick up in a couple of months once the harvest season begins in the northern hemisphere and helps to boost global supply, Bloomberg says. The harvest season comes at a critical time for Egypt, potentially enabling it to meet its 800k-ton import target during the local harvest season despite Russia and other major wheat producers restricting exports to bolster their own domestic supply during the pandemic.

Signs of stress in the international market: The reticence of other producers to export has meant that state grain buyer GASC has only imported 240k tons of wheat since the local harvest began in mid-April. Its last tender attracted just five offers — the fewest in more than a year.

Egypt has been relying on local wheat to build up its stockpile. The Supply Ministry has purchased 2.1 mn tonnes of wheat from local farmers since the beginning of the harvest season, 30% more than it snapped up in April last year at a slightly higher price of EGP 770 per ardib, Bloomberg notes.

Local farmers appear to be happy to play ball as they see higher prices and better policies from the government, including paying the farmers within 48-72 hours, which one farmer speaking to the business information service says is “way better than last year.”

The day ESG came home to roost? Our friends at Elsewedy Electric, the high-profile EGX-listed industrial, infrastructure and energy player, are the first (we believe) Egyptian company to make the blacklist of the world’s largest sovereign wealth fund. The USD 1 tn Norges Bank said yesterday that Elsewedy was among a handful of new additions to its blacklist of companies in which it will not invest on the grounds that their core business allegedly carries a “risk of contribution to severe environmental damage.” Reuters has the story, and you can view Norges’ announcement here, their full blacklist here, or skim through the criteria to make their blacklist here (pdf).

M&A WATCH- The total value of M&A in the Middle East plummeted 90% y-o-y in 1Q2020 to USD 9.28 bn from 95 transactions, down from USD 88.27 bn from 109 transactions during the same quarter last year, according to a report from Baker Mckenzie (pdf). On a quarterly basis, total M&A value rose from USD 4 bn in 4Q2019. Around 63% of all Middle East M&A activity was cross-border in 1Q2020, while domestic transaction values dropped 94% y-o-y.

Egypt was the top target market for inbound M&A at USD 2.4 bn, but the figure masks the fact that it was on the basis of a single transaction: The still-in-the-works acquisition by STC of Vodafone Group’s shareholding in Vodafone Egypt.

The total value of M&A activity in the region fell faster than the global average, which dropped 70.5% y-o-y to USD 4.29 bn during the quarter. Transaction volume globally rose 9.4% y-o-y.

Outlook is mixed, but could see growth at a slower rate: The outlook for the remainder of the year is unclear due to the high level of uncertainty from the covid-19 pandemic, said Omar Momany (pdf), who runs M&A at Baker McKenzie Habib Al Mulla in the UAE. One of the two scenarios Momany sees moving forward is M&A volumes and values slowing down even further, potentially through the end of 2020, “reflecting on the global uncertainty, investors’ anxiety and shift of priorities.” A more optimistic scenario would see growth in M&A activity “but at a much slower pace and value … driven by companies being interested to join forces in an attempt to mitigate losses and consolidate.”

India led outbound cross-regional transactions, while the UAE continued to drive inbound M&A in the region, the report said. “The UAE remained the most attractive foreign investment destination both by volume and value with 16 [transactions] amounting to USD 1.1 bn.” The value of cross-regional transactions targeting the Middle East dropped 91.4% y-o-y to USD 1.19 bn, but soared 1,078% in comparison to 4Q2019. By value, outbound cross-regional transactions rose 41.5% y-o-y to USD 3.64 bn, with volumes up 12.5%.

Industrials and tech were the most attractive acquisition target sectors for inbound and regional investment by value and volume, respectively, in 1Q2020. High technology accounted for seven transactions worth USD 190 mn, while industrials saw four transactions amounting to USD 1 bn.

M&A WATCH- UK’s Statsbomb Services acquires Arqam FC: British football analytics company StatsBomb Services has completed their acquisition of Cairo-based sport data startup Arqam FC, Statsbomb said without disclosing the value of the transaction. The acquisition was announced last year. Arqam FC collects and analyzes thousands of data points during football matches and sells them to clubs, agencies, media organizations and players.

Advisers: Venture by Shahid, an arm of Shahid Law Firm, acted as the legal representative for Arqam, it said in a statement (pdf).

M&A WATCH- FRA green-lights Sika Egypt’s MTO for Bitumode: The Financial Regulatory Authority (FRA) has approved a mandatory tender offer submitted by construction chemicals supplier Sika Egypt for up to 100% of Modern Waterproofing (Bitumode), Bitumode said in a regulatory filing (pdf). Sika’s offer, reviewed late last month by the regulator, will price Bitumode’s shares at EGP 3.79 if shareholders offer up to 95% of the company’s shares. If more than 95% of the shares are up for grabs, Sika will set the share price at EGP 3.91.

LEGISLATION WATCH- State-owned companies face economic viability tests — and could get a special break on capital gains. Proposed changes to the Public Enterprises Act would put in place new regulations to “promote financial stability” in state-owned enterprises (SOE) and introduce new limits on board compensation, Public Enterprises Minister Hisham Tawfik said yesterday. A separate piece of legislation would give them tax new tax breaks.

The amendments would require SOEs to provide evidence that their subsidiaries are economically viable, Tawfik said. Boards will be required to call for a capital increase once any subsidiary’s losses exceed its shareholders’ equity. If the company is unable to increase its capital, it will be forced into liquidation or be merged with another public entity, he added.

Cap on board compensation: Annual bonuses would be capped at 5% of distributable annual profit for board members of holding companies and 10% for people sitting on the boards of subsidiaries, while employees will be entitled to a 10-12% share of the profits, Tawfik said. Boards will also be required to have between five to nine members and select at least one member to represent the company’s employees.

Background: The long-awaited amendments gained cabinet approval in February and received a preliminary nod from the House Economic Committee earlier this week. A pillar of the legislation, revealed by Tawfik more than a year ago, would reclassify listed companies in which the government holds up to a 75% stake and bring them within the scope of the Companies Act, granting general assemblies more power to oversee and remove boards. The bill will not go to the House general assembly until it gets committee-level approval.

A special tax break only for state-owned companies? State-owned companies could see capital gains tax they pay on the sale of land to banks as part of debt settlements become tax deductible. The measure is part of a series of amendments to the Income Tax Act that received a final committee nod yesterday, El Watan reports. Businesses in which the state holds a stake of 51% or more could get a break under the measure if it passes in the general assembly.

Background: Public Enterprises Minister Hisham Tawfik told us last summer that his ministry is planning to let go of 20 mn sqm of land held by its companies to pay off EGP 38 bn-worth of debt. At the time, several state-owned companies were in talks with investment bankers to advise them on how to divest unused land.

Tawfik’s turnaround strategy seems to be getting traction in the House: When he was sworn in as minister in 2018, Tawfik unveiled a rescue plan for loss-making state firms which at the time had racked up some EGP 7.5 bn in net losses. The plan saw the ministry undertake feasibility studies to determine each company’s financial viability to shut down those found incapable of making a turnaround.

LEGISLATION WATCH- House committee curbs EGX stamp tax cut for resident investors: The House Planning and Budgeting Committee yesterday approved legislative changes to cut stamp taxes on EGX transactions and withholding tax on dividends, the local press reported. The cabinet approved plans in March to slash stamp tax to 0.05% from 0.15% but the committee yesterday decided to scale back the size of the tax cut to 0.075%. The decision was taken to narrow the tax rates charged to resident and foreign investors, said Yasser Omar, deputy head of the committee.

Foreigners will keep their tax break: The committee approved cabinet proposals to cut stamp tax for foreign investors to 0.125% from 0.15% and signed-off on plans to slash the withholding tax on dividends to 5%.

Intraday transactions will no longer be tax-exempt: Stamp tax will be charged on intraday transactions for both resident and foreign investors to “reduce speculation,” Omar said.

Background: The stamp tax was introduced as a temporary measure in 2017 in response to an investor revolt against the 10% capital gains tax. The capital gains tax was due to be reintroduced this year, but will be shelved until 1 January 2022 if the legislative changes make it through the House.

Irrigation Ministry has an EGP 18 bn plan to save 5 bcm of water by developing water canals: The Irrigation Ministry is finalizing a strategy to develop and upgrade Egypt’s water canals in FY2020-2021 and expects to present it to the Madbouly Cabinet in the coming days, Al Mal reports, citing an unnamed ministry source. The plan is expected to save around 5 bcm of water that currently goes to waste because of these canals. The ministry expects the work to cost some EGP 18 bn and plans to implement it over the course of two years, with the timeline being contingent on the availability of funding. The draft FY2020-2021 budget has allocated EGP 8 bn to the ministry.

Background: Although Al Mal makes no mention of the legislation, the new Water Resources Act — which has long been in the works — is part of the government’s strategy to better secure Egypt’s water resources by addressing recent challenges, including the impact of climate change, increased levels of pollution, and growing demand and population growth.

MOVES- Our friend Amal Enan has is now leading venture capital fund Global Ventures’ investments in Egypt and serving as chief investment officer of the American University in Cairo’s endowment. She was previously executive director of the Egyptian-American Enterprise Fund.

Making It’s next guest bridged a gap between low banking penetration and high mobile adoption. Her business was built to offer the unbanked a mobile payment solution through an outlet they already use — mobile network operators. Six years later, her company is one of the largest players in direct operator billing and the first so-called “dragon” company to come out of MENA. Look for the episode in your podcast feed tomorrow.

Until then, you can listen to last week’s episode with Tanmeyah CEO Amro Abouesh (listen, runtime: 38:37) on: Our website | Apple Podcast | Google Podcast | Omny. We’re also available on Spotify, but only for non-MENA accounts. Subscribe to Making It on your podcatcher of choice here.