EGYPT’S FOREIGN RESERVES INCREASE BY $2.8 BILLION Source: Daily News Egypt, January 24, 2010
Net foreign reserves of the Central Bank of Egypt (link here) increased by $2.8 billion at the end of November 2009, compared to levels in June of the same year.
The Central Bank report estimates that these reserves had reached about $34.1 billion at the end of November 2009, compared to $31.3 billion at the end of the fiscal year 2008/09.
Foreign reserves had recorded the first positive move during June 2009 to reach $31.63 billion against $31.31 billion in May 2009. It said the volume of foreign debt had declined by about $2.4 billion to $31.5 billion at the end of June 2009 as a result of paying $1.1 billion of loans and facilities in addition to the decline in exchange rates of most currencies of borrowing against the US dollar.
The total volume of domestic debt had increased to LE813.7 billion ($160 billion) at the end of September 2009. The volume includes government debt of 75.5 percent, public and economic bodies 6.8% and the National Investment Bank 18%.
On the other hand, the report showed an increase in domestic liquidity by LE16.5 billion ($3 billion) to record LE847.8 billion ($170 billion) in October 2009, by an increase of 2% compared to the month of July 2009.
EFG-HERMES BROKERAGE CLOSES 2009 WITH TOP RANKING ACROSS REGIONAL MARKETS Source: AMEInfo, January 20, 2010
EFG-Hermes Securities Brokerage (AmCham member) (link here) was again the number one broker on the Egyptian Exchange (EGX) (AmCham member) (link here), the Abu Dhabi Securities Exchange (ADX) (link here) and the Dubai Financial Market (DFM) (link here) for the full year 2009, and according to data independently available from the region's stock exchanges. The firm also posted strong finishes in Kuwait, Oman and Saudi Arabia, among other markets.
EFG-Hermes Brokerage, operating through its two wholly owned entities Hermes Securities Brokerage and Financial Brokerage Group, maintained its top position in Egypt with 43% of the total value of trading on the EGX.
In the United Arab Emirates, the firm's market share for the 12 months ended 31 December was 10% of the total value of trading on the DFM. On the ADX, EFG-Hermes executed 15% of the total value of trading.
In Saudi Arabia, EFG-Hermes KSA finished the year as the Tadawul's third-largest independent broker, with about 1% of total value of trading and total executions in 2009 of SR10.16 billion ($2.7 billion). EFG-Hermes' access products to the Tadawul accounted for 21% of overall swap transactions on the Saudi market for the year.
EFG-Hermes claimed an 18% of total value of trading on Oman's Muscat Stock Market, where it traded shares worth OR400 million ($1.03billion) and ranked fourth among brokers on the market. Meanwhile in Kuwait, EFG-Hermes IFA closed the year with 30% of total value of trading on the Kuwait Stock Exchange — up from 25.6% for 2008 — and ranked second of 14 brokers less than two years after entering the Kuwaiti market. EFG Hermes IFA took over the top spot in the rankings for the 4th quarter 2009.
EFG-HERMES SELLS ITS ENTIRE STAKE IN BANK AUDI FOR $913 MILLION Source: EFG-Hermes, January 19, 2010
EFG-Hermes (AmCham member) (link here) has sold its stake in Bank Audi (AmCham member) (link here) for $913 million, after lengthy discussions between the two businesses revealed that, following the events of 2008, an amalgamation in the near future would be difficult. The transaction leads to an unconsolidated capital gain of $260 million for EFG-Hermes.
On a consolidated basis, as EFG-Hermes is accruing its share of Bank Audi profit minus the dividend received on the balance sheet (equity method of consolidation), the consolidated capital gain will be significantly less, and can only be reported after Bank Audi publishes its 2009 figures. EFG-Hermes mentioned that a number of opportunities could make strategic sense in the foreseeable future and, with its strong liquidity position, which it believes it is well positioned to take advantage of these opportunities.
MORGAN STANLEY TEAMS UP WITH OCI Source: Financial Times, January 26, 2010
Morgan Stanley (AmCham member) (link here) is teaming up with Orascom Construction Industries (AmCham member) (link here), an Egyptian company, to form a joint venture that will invest in infrastructure in the Middle East and Africa.
Officials declined to discuss the details of the 50/50 venture, but it is expected to be a fund with the partners looking to invest several hundred million dollars in projects across the regions. The venture will also be seeking investments from third parties.
The two groups are hoping to tap into the need for improved infrastructure throughout the Middle East and Africa. Both are regions where populations have been rapidly expanding while infrastructure, including transport systems, water and power generation, is often lacking or in a state of decay.
In oil-rich Gulf countries, governments have tended to be the key drivers of investment in infrastructure and have sought to use the 2003-2008 oil boom to upgrade their services. Saudi Arabia, for example, last year announced plans to invest $400billion (€282billion, £246billion) in infrastructure and hydrocarbons over five years.
However, Sadek Wahba, global head of Morgan Stanley Infrastructure, said there was a growing realization among governments that the private sector should play a greater role. That trend has been accelerated by the global economic crisis, he said, as oil prices fell from their highs and growth slowed, straining government budgets. “Some of these project are very large and there’s been a general realization by some of the governments that ultimately you are better off having the private sector invest in and manage some of these assets – even countries like Saudi Arabia, Kuwait, where they still have the capital,” Wahba said. “In addition you have places like Egypt, Morocco, (and) Algeria, which simply can’t afford to go on investing in major infrastructure – they just don’t have enough capital.”
Sectors the venture would look to invest in include waste water management, water desalination, port construction, power generation and gas distribution. Nassef Sawiris, chief executive of OCI, said the venture would be looking at opportunities from sub-Saharan Africa across to the Gulf.
SHELL EGYPT TO BUY STAKE IN WESTERN DESERT CONCESSION Source: Zawya, January 17, 2010
Shell Egypt (AmCham member) (link here) has received approval to buy a 40% stake in an oil and gas concession in the Western Desert. The current co-owners, GDF Suez (link here) and privately-owned Vegas Oil and Gas (AmCham member), will each sell a 20% stake in the Alam El Shawish West Concession. Shell Egypt will operate the venture. Vegas will retain a 35% stake and GDF Suez will keep 25%.
In its daily notes, CI Capital (AmCham member) said that in the past three years, Shell Egypt has drilled 19 exploration wells and made 15 discoveries in the Western Desert. Shell produces 100,000 barrels of oil equivalent from the Western Desert, 75% of which is gas while the remaining balance falls to oil.
"The Western Desert currently plays a significant role in the production of crude oil and natural gas where there are currently 21 areas of development. During fiscal year 2007/08 the Western Desert accounted for Egypt's largest production of crude oil holding a share of 35%," CI said.
EGYPT GETS $132.4 MILLION LOAN FROM FRENCH DEVELOPMENT AGENCY Source: Arab Finance, January 27, 2010
Egypt signed a loan agreement with the French Development Agency (link here) for €94 million ($132.4 million). The agency will lend Egypt €44 million to contribute in financing the construction of a third metro line, while the remaining €50 million will go toward sewage water treatment projects.
FINAL FRAMEWORK FOR M-BANKING EXPECTED IN ONE MONTH Source: EFG-Hermes, January 27, 2010
The Central Bank of Egypt (CBE) (link here) will finalize the regulatory framework for mobile banking (mbanking) services in Egypt within a month, according to several newspapers. The Ministry of Communications and Information Technology (MCIT) (link here) is awaiting the CBE's approval of the framework in order to begin setting tariffs for m-banking services, in cooperation with the three mobile operators, according to Mahmoud El-Gowini, senior advisor to the minister for communication policies.
LEBANON’S BANQUE AUDI AGREES TO ACQUIRE DRESDNER BANK MONACO Source: Bloomberg, January 18, 2010
Banque Audi (AmCham member) (link here), the largest Lebanese lender by assets, agreed with Commerzbank AG (AmCham member) (link here) to acquire Dresdner Bank Monaco S.A.M. (link here).
“The parties have agreed to maintain confidentiality about the details of the transaction, the closing of which is subject to receipt of necessary regulatory approvals,” Banque Audi said. The statement said that the acquisition of Dresdner Bank Monaco is in line with Banque Audi’s strategy to develop its private banking activities in Europe.
EGYPT'S MOBINIL MAKES 3G LICENCE PAYMENT Source: Reuters, January 17, 2010
Egypt's Mobinil (AmCham member) (link here) made a LE750 million ($138.3 million) installment to the telecom regulator as part of a payment for its 3G licence, the firm said.
Mobinil, Egypt's largest mobile operator by subscribers, is selling bonds worth LE1.5 billion in an offer that closes on January 24, and has said it would use some of the proceeds to pay for the 3G licence.
ORASCOM TELECOM LENDERS GRANT WAIVER AHEAD OF RIGHTS ISSUE Source: Khaleej Times, January 23, 2010
Egypt’s Orascom Telecom (OT) (link here) has received from major lenders a waiver related to an Algerian tax claim ahead of a proposed $800 million rights issue.
“The waiver is conditional to the successful completion to the forthcoming capital increase of Orascom Telecom Holding with a minimum take up of $700 million out of the $800 million proposed rights issue,” Orascom said in an emailed statement.
Under the terms of a $2.5 billion credit agreement, Orascom was required to make a representation that it had no substantial tax claims against it. It received an earlier waiver in late 2009 that was due to expire on January 26.
Egyptian market heavyweight Orascom, which runs mobile phone operations from North Africa to North Korea, was hit with a $596.6 million bill in November for outstanding Algerian taxes and penalties. Orascom last month filed an appeal in Algeria against the tax bill.
Orascom received shareholder approval on December 27 for an $800 million rights issue that would help it cover any cash shortfall as it tries to resolve the tax dispute with Algeria. The rights offer subscription opens on January 31 and continues until March 1.
“The waiver obtained is specific the Algerian tax claim against Orascom Telecom Algeria in respect of years 2004-2007,” Orascom said. Algeria’s tax authority had ruled that the company’s Algerian mobile operator Djezzy (link here) had not kept proper accounts between 2005 and 2007. It also said Djezzy owed $50 million in taxes from 2004, a claim Orascom also disputes. Djezzy had revenue of $1.8 billion in 2007.
EGYPTIAN MOBILE PHONE SUBSCRIBERS RISE IN NOVEMBER Source: Reuters, January 24, 2010
The total number of Egyptian mobile phone subscribers rose to 53.682 million in November from 52.978 million in October. More than a million accounts have been created every month since late last year, but some 450,000 accounts were closed during October. In November, some 704,000 accounts were created. A year ago, there were 37.626 million subscribers.
The mobile landscape is underdeveloped compared with Egypt's regional peers but fiercely competitive, with three operators offering on-network discounts to win customers.
ORASCOM TELECOM TO INTRODUCE MARINE CABLE SERVICES Source: Daily News Egypt, January 25, 2010
Mena Marine Cable, an affiliate of Orascom Telecom Holding (OTH) (link here), is set to launch marine cable services in March, at a total cost of $350 million. The cable links France to Egypt through the Greece territories.
Amr Badawi, executive president of the National Telecom Regulatory Authority (NTRA) (link here), confirmed that the telecom regulator should be notified of the launch date. He indicated that local companies would benefit from the 5.76 Tb/s cable services.
Egyptian Company for Mobile Services (Mobinil) (AmCham member) (link here) is not allowed to capitalize on this product, Badawi said, explaining that the mobile operators would not offer international telecom services except after paying the required fees. The cable is projected to be extended to Asia through Saudi Arabia over the coming period. The license will last for 20 years.
The ownership structure of the subsidiary is divided as follows: OTH (94%), Link Egypt for Trade and Services (4%) and InTouch (2%).
EGYPT TO OFFER LICENSES FOR 8 CEMENT PLANTS Source: Daily News Egypt, January 28, 2010
Egypt will offer licenses in the first half of this year to build eight cement factories with capacity of 1.5 million tons each, Trade Minister Rachid Mohamed Rachid said.
Rachid said that he hoped the new plants would start production in 2014 or 2015, to help meet growing domestic consumption which rose 16% last year.
Earlier this month Rachid said that Egypt was planning to 12 licenses to build cement factories in 2010 to meet growing local demand.
Rachid said domestic consumption in Egypt had grown to almost 60 million tons, "and we are anticipating growth of around 10%". Egypt's construction industry has continued to grow in the wake of the global economic crisis, even as it stalled elsewhere in the region.
SIAC BUYS STAKE IN LUXURY EGYPTIAN OFFICE SITE Source: AMEInfo, January 20, 2010
Egypt's SIAC Group (link here) has acquired a 20% stake in a joint venture to develop offices in a high-end project owned by Sixth of October Development and Investment Company (SODIC) (AmCham member) (link here). The 33,000 square-metre project, known as the Polygon, is seen as a barometer for luxury real estate demand in Egypt. The joint venture, owned 80% by SODIC, will build the offices in the project, which also includes leisure and commercial facilities, at a total cost of LE286 million ($53 million), SODIC said, adding construction should begin in the coming months and finish by the first half of 2013.
Egypt has eased the terms for companies interested in bidding on the contract to renovate Cairo International airport's second terminal, in an effort to increase the number of potential bidders. Among the changes, potential bidders will now have to show they have completed at least one similar project within the past ten years worth at least $200 million, while previously companies were required to have completed a project worth at least $250 million within the past six years. The deadline has also been delayed by three weeks, from February 7 to February 28.
CEMENT PRODUCERS RAISE PRICES Source: Al-Masry Al-Youm, January 21, 2010
Suez Group, Egypt’s largest cement producer, raised its selling price in Cairo by LE22 per ton to LE522 per ton while the selling price outside Cairo increased from LE500 per ton to LE542 per ton.
The group consists of Suez Cement (AmCham member) (link here), Tora Cement and Helwan Cement. Meanwhile, Amereya Cement increased its selling price by LE20 per ton compared with an increase of LE15 per ton for Misr Beni Suef Cement Company.
Lafarge (AmCham member) (link here) also decided to increase its selling price outside Cairo LE20 per ton but maintained the selling price in Cairo. Egypt’s Ministry of Trade and Industry (link here) announced that it was studying the reasons behind the price increase which, according to producers, are cost-related.
RACHID SAYS NO RESTRICTIONS ON CEMENT PRICES Source: Daily News Egypt, January 26, 2010
Minister of Trade and Industry, Rachid Mohamed Rachid, mentioned that there is no objection to the increase in cement prices, provided that this is justified and logical and would not harm consumer.
The minister said that the government will not impose any restrictions on the price of cement in the market, but in return will not give up their key role in oversight and regulation of market forces, through the mechanisms provided by the law.
Earlier this week, it was reported that the government rejected an attempt by the cement industry to raise prices based on sustained high demand.
Suez Cement (AmCham member) (link here), a subsidiary of Italian company Italcementi (link here), and one of Egypt’s largest cement producers, planned to charge LE22 more per ton, raising its price from LE433 to LE455. Amreyeh Cimpor Cement Co, a subsidiary of Portuguese company Cimpor (link here), had contemplated a similar price hike.
The Ministry of Trade and Industry (link here) said it issued a “warning,” according to ministry official Hesham Ragab, against potential increases.
LOCAL STEEL PRODUCTION FALLS 50% Source: Al-Alam Al-Yom, January 22, 2010
Production of public steel companies dropped by 50% due to importation of low-priced Turkish steel, according to Zaki Bassuony, head of the Holding Company for Metallurgical Industries.
The company is asking the government to impose antidumping tariffs on imported steel. Bassuony decaled that the holding company sold 14.5 million shares in Egyptian Iron & Steel and 3 million shares in Egypt Aluminum to raise the free float in the two companies to 5% in compliance with new listing rules. The holding company’s stakes in both companies will drop to 90%.
MASDAR SIGNS AGREEMENT WITH EGYPTIAN SUGAR COMPANY Source: Business Wire, January 21, 2010
Masdar (link here), a wholly-owned subsidiary of the Mubadala Development Company (link here), announced it signed an agreement with the Egyptian Sugar and Integrated Industries Company (ESIIC) (link here) to develop a fuel-switch project under the guidelines of the Kyoto Protocol’s Clean Development Mechanism (CDM).
The project, in which ESIIC will invest over LE40 million ($7.5 million), will replace the company’s consumption of mazut fuel oil with natural gas and is expected to reduce carbon emissions by an equivalent of 57,200 tons of carbon dioxide (CO₂) per year for a period of ten years.
Masdar will monetise the emission reductions and provide advisory services required to register the project at the United Nations (link here) in line with the requirements of the Kyoto Protocol’s clean development mechanism (CDM). Masdar will support the project execution in coordination with ESIIC and purchase the resulting carbon credits, thereby providing financial incentives for the development of the project.
EGYPT'S ALCOTEXA SELLS 2,182 TONS COTTON Source: Arab Finance, January 26, 2010
Egypt's Alexandria Cotton Exporters' Association (Alcotexa) (link here) committed to sell 2,182 tons of cotton in the week that ended on January 23. The sales comprised 100 tons of Giza 87, 317 tons of Giza 88 and 1,765 tons of Giza 86. The deal brings Alcotexa's export commitments for the 2009/10 season, which began in September, to 54,875 tons of cotton worth $122.7 million.
EGYPT'S OCI EARMARKS $200 MILLION FOR FERTILIZER PROJECTS Source: Reuters, January 27, 2010
Orascom Construction Industries (OCI) (AmCham member) (link here), Egypt's biggest listed builder, has earmarked about $200 million for fertilizer production lines and other initiatives.
The money has been allocated for a urea ammonium nitrate production line, an ammonium sulphate line and the expansion and upgrade of existing urea production capacity in Egypt, Investor Relations Manager Omar Darwazah said.
The $200 million would be spent on two new fertilizer factories."These initiatives are already under construction," Darwazah said.
OCI, which lists its shares in Cairo and London, has interests in construction and fertilizer production. Many analysts predict it will do well this year as fertiliser prices continue to rise.
The firm is also considering bidding for Copebras, a Brazilian fertilizer maker owned by Anglo-American (link here), and licences to produce fertilizer in India, Chief Executive Nassef Sawiris has said.
EGYPT TO LIBERALIZE NITROGEN FERTILIZERS MARKET Source: Al-Masry Al-Youm, January 28, 2010
Egypt is looking to liberalize the nitrogen fertilizers market next march. The government has ordered this month Abu Kier Fertilizers to renew its supply contracts with the Principal Bank for Development & Agricultural Credit (link here) for only two months instead of a whole year.
Egypt’s production of nitrogen fertilizers is expected to reach 16.1 million tons in fiscal year 2009/10. Local factories contribute to 51.1% of total production and the remainder comes from free zones.
SEVERAL NEW SUGAR FACTORIES TO ADD AN ADDITIONAL 1 MILLION TONS PER YEAR Source: EFG-Hermes, January 27, 2010
A number of new sugar beet factories are currently under development by several companies, with a combined production capacity of over 1 million tons of sugar per annum, in an effort to narrow the supply-demand gap in Egypt. The combined investment cost of these expansions is LE8 billion ($1.5 billion), and they will increase Egypt's sugar production to cover 84% of total consumption.
El Dakahleya Sugar Co. will begin operating its second line next year, which has a capacity of 127,000 tons per year. Nubareya Sugar Manufacturing & Refining is constructing a second line with a yearly capacity of 125,000 tons, for LE1 billion ($183 million).
Delta sugar (link here) is also considering establishing a factory with the same capacity for LE1.1 billion ($202 million). Fayoum Sugar Company is undergoing capacity expansion, adding 250,000 tons of capacity for an investment of LE850,000 ($100,000).
Additionally the private sector is completing a sugar factory in the Nubareya area, with a capacity of 150,000 tons per year, which will begin operating within days, in addition to obtaining a licence for a second factory.
EGYPT TO EXPORT AT LEAST 600,000 TONS RICE Source: Arab Finance, January 28, 2010
Egypt expects to export 600,000 to 800,000 tons of rice this year, Trade Minister Rachid Mohamed Rachid said. That would mark a doubling of last year's exports, he said, but still well short of levels before Egypt curbed sales in response to water shortages and a food crisis in 2008.
Rachid said in September that Egypt had the capacity to export one million tons of rice a year but that it wanted to limit these exports to save water. Egypt has a water supply of about 860 cubic metros per person a year, below the water poverty line of 1,000 cubic meters per person a year, with agriculture consuming more than 80% of that supply.
EGYPT MAY STALL PROPERTY TAX LAW Source: Zawya, January 18, 2010
H.E President Mubarak said that the property tax law is not finalized yet, and that he is "thinking of ways to render the implementation gradual." Finance Minister Youssef Boutros Ghali clarified stating that the law would not undergo amendments, and that the current considerations pertain merely to its rate of implementation. "There is no intention to change the current law," he said.
The annual tax on property that is worth LE500,000 will be LE30, while the annual tax on property that is valued at LE1 million will be LE660.
Beltone (AmCham member) (link here) has released its opinion that "the tax is a good step by the government to increase its revenues... Under the new Law 196 of 2008, the tax rate was cut from 40 percent to 10 percent and the tax base expanded to include all property in Egypt" other than agricultural land and specific types of property.
As pointed out by Tarek Farrag, chairman of the Real Estate Tax Authority, 95 percent of the Egyptian population is exempted from the tax. However, of those taxed, Beltone predicts revenues could increase to LE3 billion or LE4 billion, as compared to the current annual average of LE680 million.
Beltone believes that the tax could have additional positive benefits, causing property owners to "make economic use of their unused assets," thus raising property stock in economic activity as well as the number of residential units available, a welcome development in a country hobbled by an acute housing shortage.
Compiled by: Business Studies & Analysis Center E-mail: Studies@amcham.org.eg If you want to receive this bulletin on a regular basis, fill out this form
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