IPO WATCH- E-finance is going to IPO, and NI Capital is asking investment banks to pitch for the mandate: NI Capital, the state-owned investment bank that is shepherding the Sisi administration’s IPO program, has invited several local investment banks to bid to quarterback the upcoming stake sale of fintech company e-finance as part of the second wave of the state privatization program, unidentified sources close to the matter tell Al Mal.

Rehabilitation: Beltone Financial, which settled earlier this year with the Financial Regulatory Authority after being suspended in the wake of an IPO last fall, is one of the banks that got the call, the newspaper claims. Beltone is planning to bid as part of a consortium, Al Mal added.

Background: Public Enterprises Minister Hisham Tawfik confirmed in April that e-finance would be part of the second wave of the program, which is set to begin as early as September. Tawfik told us in March that the second wave of privatizations is expected to only involve new listings, and companies in the industrial, mining, and E&P sectors will be prioritized. One company will IPO each month, he said.

WTO to probe Egypt’s steel import duties: The World Trade Organization (WTO) will meet with Egyptian officials to discuss the recently imposed duties on steel imports during its November committee meetings, according to a press release (pdf). The Trade Ministry last month introduced 180-day import duties of 25% on finished steel rebar and 3-15% on iron pellets in a bid to protect local manufacturers. The WTO meetings come after Japan, Australia and South Korea complained that the country’s anti-dumping measures violate WTO rules. The global trade body will also hold talks with the European Union, Morocco, Canada and the Eurasian Economic Union, which have adopted similar protectionist measures.

Where will Egypt go from here? The temporary measure may be made permanent as soon as the ministry completes a study on whether these products are being dumped in Egypt. Sources told the local press that the Industrial Development Authority received a letter from the WTO about the measures, but provided no further details.

What do WTO rules say? Under WTO rules, a country is allowed to take emergency measures such as introducing temporary tariffs, subsidies and import quotas if its local industry is under serious threat by increasing imports. Key here is that the industry has to face “serious injury” before the government can take action — and a detailed investigation must take place in order to quantify the damage. Countries are also not permitted to target imports from specific countries.

Bombardier says its consortium has been tapped as preferred bidder for monorail project: A consortium of Orascom Construction, Arab Contractors, and Bombardier Transportation has been tapped as the preferred bidder to build a monorail linking Six October to the new administrative capital, Bombardier confirmed in a statement. The project would entail the construction of a 54-km-long monorail system connecting 6 October with the new administrative capital, in addition to a 42 km line that would connect 6 October to Giza. “The potential value of the bid for Bombardier Transportation is GBP 1.2 bn (USD 1.3 bn) for the Design & Build Contract. In addition, there is a 15+15 years Operations and Maintenance [agreement] with a potential value of about GBP 1.1 bn (USD 1.2 bn).” As we previously noted, the selection is not final and is subject to final confirmation.

ECA calls foul on Delivery Hero-Glovo “arrangement,” orders Glovo to come back to Egypt: The Egyptian Competition Authority (ECA) said an “arrangement” between Delivery Hero and Glovo to “divide up” markets” led Glovo to exit Egypt in violation of the competition law, the ECA said in a statement (pdf). The competition regulator has ordered Glovo to return to the country and to scrap its agreement with Delivery Hero within 30 days. “The concentration of market power with Delivery Hero could lead to practices that constrain competition and have a negative impact on all players in this market whether users, drivers or restaurants,” the ECA said.

Glovo has yet to be officially notified of the ECA’s decision, an unnamed company official tells Masrawy. According to the official, the company is currently in talks with the ECA over the potential consequences if it fails to comply with the order, including paying a fine.

Background: Spanish delivery startup Glovo, partially owned by Germany’s Delivery Hero, sent messages last month to its employees in Egypt informing them of the decision to indefinitely suspend its operations in Egypt following a EUR 150 mn series D funding. Glovo has also exited Chile, citing “some hefty financial losses” in 2018. The ECA’s intervention comes after it threatened both Uber and Careem with EGP 500 mn fines following their USD 3.1 bn mergerin March.

Meanwhile, the ECA called in Huawei for a chat about the handset and network equipment maker’s recent woes, which have seen Google pull Huawei’s license to use the Android operating system. Ahram Online has the story.

LEGISLATION WATCH- Aspiring crypto businesses are going to need licenses: Companies looking to establish digital currency and cryptocurrency platforms will be required to obtain licenses under the proposed Banking Act, an unnamed central bank official told state news agency MENA without providing further details. The bill would also give the CBE regulatory power over the use of cryptocurrency in Egypt. We noted earlier this month that the CBE has effectively blacklisted crypto in its recently issued e-commerce guidelines for banks. The current draft has been with the Madbouly Cabinet for review since January and is due to be introduced to the House of Representatives soon.

This isn’t necessarily a bad move. We can’t afford the CBE to block the exploration of crypto in Egypt — but the last thing Egypt needs is a modern-day El Rayyan scandal centered on crypto. If it can happen in Canada, where cryptocurrency exchanges are still essentially unregulated. The trick will be to balance a light hand with legitimate businesses with devastatingly draconian penalties for would-be fraudsters and startups that fail to build in adequate safety protocols.

The EGP is still “tightly managed” and will continue to appreciate, Dubai-based Lighthouse Research said in a note (pdf). The firm said the appreciation of the EGP against key currencies since the start of the year “defied the broader sell-off in global emerging market assets.” It pointed out that the KRW, ZAR and TRY have depreciated by 6%, 4% and 15% respectively. The Egyptian pound was selling at 16.8794 to the USD on Tuesday, having broken through the psychologically important EGP 17 barrier.

It’s not about foreign reserves, Lighthouse argues, pointing out that most inflows took place from November 2016 until February 2018 before a stagnation that has seen the figure only go up by USD 1.7 bn since. The current account deficit has seen some improvement though, thanks to higher exports and a recovery in the tourism industry, the firm notes.

Egypt could combine stamp duty and capital gains taxes on stock market investments to reduce the financial burden on investors, EGX boss Mohamed Farid told Reuters. Proposed amendments could have the government refund a portion of the stamp duty if its value exceeded capital gains that are paid towards the end of the year, Farid said. “The amendments (to tax laws) could include … a combination of the stamp duty and capital gains taxes, with the capital gains tax acting as a ceiling for the stamp duty tax,” Farid told the newswire.

What’s going on? The Finance Ministry and EGX are working on potential scenarios for the implementation of a capital gains tax on stock market transactions when the levy comes back into effect next year, Farid told us earlier this week.

CLARIFICATION- The amendments could also mean the tax would be calculated differently for resident and non-resident investors, Farid had told us. We incorrectly said in yesterday’s issue that the proposal was to create a different calculation for local and foreign investors.

Background: After a revolt by retail investors, officials shelved in 2017 for a three-year period a tax on capital gains made on the EGX — and replaced the measure with a provisional stamp tax. The full introduction of the tax was a recommendation of the IMF, and reports in the local press citing unnamed government sources had suggested earlier this month that the government would not be bringing back the tax “anytime soon” despite deciding to keep the stamp tax on EGX trades unchanged at 0.150%.

Trade minister holds talks with UK trade secretary on post-Brexit ties: British trade secretary Liam Fox sat down with Trade Minister Amr Nassar for talks about the UK’s post-Brexit trade relationship with Egypt, according to a ministry statement (pdf).

Post-Brexit talks started last year: Brexit would see the UK abandon a trade pact that saw Egypt and the European Union ease trade barriers on agricultural and manufactured products. The two sides began early talks last year over a new agreement, at which time the UK was said to be looking to negotiate terms similar to those in the EU pact, while Egypt was pushing for ways to increase exports. UK Trade Commissioner for Africa Emma Wade-Smith confirmed the talks to Enterprise in an exclusive sit-down in December. Wade-Smith emphasized Britain’s willingness to push for continuity on the trade front and more investment.

May’s resignation could slow down early talks: UK Prime Minister Theresa May is stepping down at the end of the month, which will likely slow the talks as her success sorts out his or her Brexit agenda.

Correction: 29/05/2019

A previous version of this article incorrectly stated that Fox met with President Abdel Fattah El Sisi. 

Tax breaks for exporters to launch tomorrow on trial basis: The Tax Authority will meet tomorrow with leaders of Egypt’s export councils to implement on a trial basis the tax settlement mechanism which will be introduced under the new export subsidy program, Al Shorouk reports. We noted yesterday that exporters will be getting tax breaks as part of a new framework to recompense overdue export subsidy payments. The program will effectively pay out what is claimed to be up to EGP 12 bn in incentives owed to Egyptian exporters by the Export Subsidy Fund since last year.

EARNINGS WATCH- Elsewedy Electric reported a 32% y-o-y drop in net profit to EGP 957.2 mn in 1Q2019, down from EGP 1.4 bn in 1Q2018, the company said in its earnings release (pdf). Revenues for the quarter grew 12% y-o-y to EGP 11.2 bn from EGP 9.9 bn in 2018. Revenue growth was driven primarily by turnkey projects, which rose by 33% y-o-y during the quarter. “The first quarter of 2019 saw Elsewedy Electric return to steady top-line growth after three consecutive quarters of contracting revenue during 2018, a year of normalization,” CEO Ahmed Elsewedy said, adding that the company is “aggressively moving” to develop its turnkey segment in Africa, Asia and the GCC.

EFG advises on Saudi healthcare merger: EFG Hermes has completed advisory on a JV agreement between London Stock Exchange-listed UAE healthcare provider NMC Healthcare and Hassana Investment Company, the investment wing of the Saudi General Organization for Social Insurance, the bank said in a statement (pdf). NMC Health will own a majority 53% stake in the new company, which will be one of the largest healthcare providers in Saudi Arabia.

MOVES- Markets sage and Allianz chief economic advisor Mohamed El Erian (LinkedIn) has been appointed president at Cambridge University’s Queens’ College, Bloomberg reports. El Erian will succeed Lord John Leonard Eatwell in October 2020. The son of an Egyptian diplomat and a four-time feature of Foreign Policy’s Top 100 Global Thinkers, El Erian is the author of When Markets Collide and The Only Game in Town. He earned his undergraduate degree at Cambridge and his masters and PhD in economics at Oxford. Reuters also has the story.

MOVES- President Abdel Fattah El Sisi has appointed (pdf) Fakhry El Fekki (bio, pdf) to the board of directors of the Central Bank of Egypt, replacing Planning Minister Hala El Said. Fekki has served with the IMF, United Nations and World Bank in a career that has so far spanned 35 years.

MOVES- World Bank Group senior vice president Mahmoud Mohieldin has been appointed as a member of the AmCham’s advisory council, Al Shorouk reports.

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