Spell not yet broken: PMI still signals decline. Egypt’s non-oil private sector continued to decline in December, as per the Emirates NBD Egypt PMI compiled by Markit, which registered a reading of 42.8. The downturn eased slightly from November’s, but remains substantial. “Output, new orders and input buying all dropped considerably, continuing trends observed throughout the latter part of 2016 … sharp inflation was a key factor behind firms’ difficulties. Purchase costs rose at a near-record pace, leading to a lack of raw materials at some companies. This restricted output … had a damaging effect on client demand.” Seeing the only silver lining in the report, Jean-Paul Pigat, Senior Economist at Emirates NBD, said: “New export orders decreased at the slowest pace since September 2015. Although the process will not be immediate, a weaker Egyptian pound following November’s devaluation will eventually help boost export growth,” an important step, given weak domestic demand. December’s PMI reading rounded off the worst quarter on average since PMI data collection began in 2011. Tap here to read the full report (pdf).

Cabinet has approved a draft bankruptcy and restructuring law, Al Masry Al Youm reported. Justice Minister Mohamed Hossam Abdel Rehim said the law aims to create an intermediary system that reduces the need to resort to court proceedings whenever companies go in arrears and simplifies post-bankruptcy procedures. The draft law creates a bankruptcy department within existing economic courts that would intermediate in restructuring processes in cases of bankruptcy. The law will also remove “debtors’ prison” clauses that left individuals going through bankruptcy facing imprisonment, but strengthened the penalties for bankruptcy fraud. Investment Minister Dalia Khorshid said the draft law is part of the legislative reform aimed at improving the business climate in Egypt. “Until now, Egypt has had no specific law on bankruptcy, meaning failed companies have had to go to court on a case-by-case basis,” Reuters notes.

We obviously want to see the details of both the law and its executive regulations, but this could be very good news indeed, marking a sea change in how bankruptcy is treated, particularly if there are strong provisions allowing a company to restructure with a measure of protection.

Gov’t to buy wheat from domestic farmers at international prices: Cabinet has approved a decision to purchase wheat from domestic farmers at the same price as GASC pays for wheat it purchases in international tenders, Agriculture Minister Essam Fayed said, according to Reuters' Arabic service. The purchase price for domestic wheat will now be set according to the equivalent of the average price paid by GASC in USD for wheat tenders in the two months prior, explained Fayed.

…Prior to the float of the EGP, the Egyptian government was purchasing wheat from farmers domestically at a price slightly above the international market levels at the time, according to the FAO. In November 2015, the government had proposed implementing a similar system to the one the cabinet approved that would have replaced “the procurement price policy with direct subsidies to farmers and the purchasing of the local wheat harvest at the average international price prevailing during the harvest time (April‑June). However, the decision was subsequently reversed and the procurement policy reinstated to encourage farmers to increase the area planted to wheat.” Given that the cabinet is resorting to a system that does not fix prices for farmers (and along with the ongoing absence of any futures market for them to hedge their risks), we wonder: What impact would this decision have on domestic wheat production this upcoming season? This is especially a concern in light of reports that winter wheat sowings in France are edging to their highest in more than 26 years and Russian grain harvests are exceeding market expectation.

The Farmers’ Syndicate and the House Agricultural Committee are putting up a fight: The syndicate head said the state should not have taken the decision if it doesn’t support production, and that flip-flopping on decisions will lead to farmers losing confidence in the government and choosing to plant more lucrative, rather than strategic, crops, according to Al Borsa.

Among the other decisions made during its weekly meeting yesterday, Cabinet has:

• Voted to double the budget allocation for the General Authority for Supply Commodities to EGP 16 bn from EGP 8 bn post the float of the EGP;
• Signed off on a presidential decree that allocates 15.35 feddans of state-owned land to the Holding Company for Drinking Water and Sanitation to be used for a drinking water purification plant;
• Discussed how to simplify procedures for investors in land reclamation and agricultural projects in Toshka;
• Voted to amend the inheritance law to enforce stricter punishments and heavier fines for anyone who intentionally withholds inheritance from beneficiaries;
• Approved a KWD 200k facility from the Kuwaiti Fund for Development to fund consultancy services for new solar power facilities and a solar panel plant.

Mobile network operators will be given their respective 4G spectra in “stages,” not in one go, CIT Minister Yasser El Kady told Al Mal. El Kady says the MNOs were never promised delivery of the spectra immediately after paying for them and that the roll out will be in stages depending on geographic locations. Coastal cities and the Sinai Peninsula will be covered last due to security concerns, he added.

…Etisalat Misr Chief Corporate Affairs Officer Khaled Hegazy says the operator has not been officially notified as to when it would be granted its 4G spectrum and says the CIT Ministry needs to explain how MNOs would be able to implement 4G if they do not get access to their entire spectrum bandwidth directly. For its part, Vodafone Egypt says its agreement with National Telecom Regulatory Authority (NTRA) allows it to begin rolling out some 4G services on its existing 3G spectrum. Orange Egypt also said it is only limiting its 4G trials in a limited number of areas.

Orange has also said it is unaware of the Consumer Protection Agency (CPA) referring it, along with Vodafone Egypt, to prosecution for allegedly misleading the public about the rollout of 4G. Orange Egypt says it is was only asked to send a representative to present documents related to its 4G rollout campaign. The prosecutor’s office only received yesterday the complaint lodged by the CPA, according to Al Shorouk.

The supergiant Zohr natural gas field will start production on schedule by the end of this year, Eni CEO Claudio Descalzi told President Abdel Fattah El Sisi during a meeting in Cairo yesterday, according to a readout of the meeting provided by Ittihadiya.

Qalaa selling its stake in RVR? Qalaa Holdings is reportedly looking to sell most or all of its stake in Ugandan-Kenyan venture Rift Valley Railways (RVR), Al Borsa says, citing unnamed officials. Rift Valley Railways has the exclusive right to run the Kenyan and Ugandan national railway for 25 years. Al Borsa suggests it is the full stake controlled by Qalaa’s Africa Railways (limited partners in which include development finance institutions) that’s on the auction block. Kenyan media, though, suggest Qalaa would retain about 5% after the transaction. Kenya’s Business Daily has extensive coverage of the story here and here, including some inside baseball on the consortium that’s reportedly looking to fast-track a sale. Qalaa has already reclassified Rift Valley Railways “as a discontinued operation on Qalaa’s income statement and a liability held for sale on its balance sheet,” the company said in its 3Q2016 earnings (pdf).

Toyota Egypt will not recall Hilux, Fortuner models: A recall on Toyota Hilux and Fortuner models taking place in the GCC does not apply to Egypt, Toyota Egypt told Al Mal. The Fortuner models in Egypt are assembled from parts imported from Japan, while the GCC imports from Taiwan, said head of post-sales service Samir Ali said. The same goes for the Hilux models that being recalled in the GCC; they are the twin cabin models which Egypt does not assemble, he added.

The EGP will inevitably regain strength, but the government needs to win credibility first, Patrick Werr writes in The National. He believes that the central bank might have been “quietly telling bankers in recent days not to let the currency weaken further” and cross the “psychological barrier” of EGP 20 per USD 1. Werr says the central bank should resist the urge to intervene as the main concerns now are ensuring that EGP holders can convert it and to rebuild confidence in the currency. One way to do that, he says, is to remove the ambiguity surrounding the terms of the IMF financial package to end speculation on issues like a rumored new real estate and capital gains taxes and further increases in fuel price. The whole point of the reform package “was to win credibility,” Werr says, “but much of this could be lost if the agreement is not made public. Egypt’s policymakers would be doing the country a world of good if they would publish the programme while allowing the pound to slide until supply meets demand. They could then sit back and enjoy its inevitable bounce.”

Senior bankers with whom we spoke yesterday suggested that the strengthening of the EGP over the past week was the result of a number of factors, none of which was CBE intervention. The biggest factor, one said: “The usual slowdown in LC requests that comes at Christmas and New Year’s. In fact, we think the EGP would have appreciated a bit more had it not been for significant buying from gold merchants.”

A handful of international stories you might want to consider on a very slow news morning at home and abroad:

• The Dubai Financial Market is (finally) planning to introduce short selling “in the coming months.”
• We’re about to get some competition for offshore oil investment from … Lebanon? “Lebanon approved two measures allowing it to auction its first offshore oil and natural gas rights, ending three years of delays that kept the tiny country from joining a regional race to tap energy wealth in the eastern Mediterranean,” Bloomberg reports.
• “America’s Roster of Public Companies Is Shrinking Before Our Eyes” declares the Wall Street Journal (paywall), explaining that plentiful private capital and a merger boom is causing listings to plunge by more than 3,000 since the 1997 peak. “The U.S. is becoming “de-equitized,” putting some of the best investing prospects out of the reach of ordinary Americans. The stock market once offered a way for average investors to buy into the fastest-growing companies, helping spread the nation’s wealth. Since the financial crisis, the equity market has become bifurcated, with a private option available to select investors and a public one that is more of a last resort for companies.
• The West's Biggest Problem Is Dwindling Trust, by Russian business journalist Leonid Bershidsky for Bloomberg View, will resonate with many of us here.
• The Donald is thinking about restructuring the US intelligence community, the Wall Street Journal reports.
• The Amazon Effect: US retailer Sears is closing 150 stores while iconic brand Macy’s will shutter 68 outlets and slash 10k jobs as part of the ongoing shakeup of the US retail space.
• Weep, children of the 1980s: The Waldorf Astoria Hotel in Manhattan will close indefinitely for renovations on 28 February. Even if you’ve not visited, you’ll recognize the place from films and TV shows including Welcome to America, [Redacted] and the City and the tango scene in Scent of a Woman.

CORRECTION- Recently appointed EFG Hermes Frontier CEO Ali Khalpey was a co-founder of Exotix Africa (as we noted in the body of our piece yesterday), not founder of Exotix (as we wrote in the story slug).