B monthly august 16 by Business Monthly

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NOT FOR SALE

AUGUST 2016

ALSO INSIDE: SNACKTIME

SMEs THAT STAND OUT BOSSES ON BIKES

Dress for

success

The unmet potential of Egyptian textile exports

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AU G U S T 2 0 1 6 VOLUME 33

ISSUE 8

Cover Stor y Cutting it close A falling currency is supposed to give exports a boost. So why is Egypt’s textiles industry—one of its most successful in the years before 2011—stuck in the mud?

Cover Design: Nessim N. Hanna

Inside 10

Editor’s Note

Viewpoint

The Newsroom 14

In Brief The news in a nutshell

Region Notes News from around the region

© Copyright Business Monthly 2016. All rights reserved. No part of this magazine may be reproduced without the prior written consent of the editor. The opinions expressed in Business Monthly do not necessarily reflect the views of the American Chamber of Commerce in Egypt.

Business Monthly – August 2016

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AU G U S T 2 0 1 6 VOLUME 33

ISSUE 8

Market Watch

Stock Analysis Choppy waters

Capital Markets A glance at stocks and bonds

Money & Banking Forex and deposits

Key Indicators The economy at a glance

Egypt-U.S. Trade Imports and exports

In Depth 20

8 I

Will price hikes hurt Egypt’s snack sector? The packaged foods industry responds to record inflation For SME lending, banks look north Delta small businesses may be hidden investment gems

Business Monthly – August 2016

Executive Life 42

Dining Out Taking a dip in the heat

Culture Highway to Heliopolis

The Chamber

Corporate Clinic

New Members

State of the economy CBE reveals the extent of Egypt’s economic problems

Member News

Classifieds

Media Lite An irreverent glance at the press

Editor’s Note

WINTER IS COMING

n July 26, after months of rumors and denials, officials finally confirmed that they are in negotiations with the International Monetary Fund on a major financing deal. The $12-billion IMF loan package, which is being billed as support for the government’s economic plan, is “100-percent Egyptian” according to a statement by the Ministry of Finance. The money—which is to be part of a larger, $21-billion package from various sources—will go to support Egypt’s program to promote development, social welfare and the economy, said finance minister Amr Garhy. Referring to Egypt’s worsening foreign currency shortage and the pound’s plummeting value against the dollar, Garhy said: “The government is not afraid of the increase in exchange rates.” Maybe it should be. Growth has slowed this year as tourism has taken a turn for the worse, and the lack of forex hinders businesses already struggling to recover after the economic downturn that followed the unrest of 2011. GDP growth has averaged just 2.5 percent in the five years since, compared to 5 percent in the decades before. For the 10th month in a row, the Purchasing Manager’s Index reported that conditions in Egypt’s nonoil sector deteriorated. The reason IMF loans are such a big deal in the current climate is because they “generally come with performance targets that need to be met,” writes Jean-Paul Pigat, a senior economist at Emirates NBD. But despite heavy speculation about what austerity conditions the IMF loan might carry—subsidies and public payroll cuts, tax hikes, a more flexible exchange rate for the pound—both the government and the IMF seem to be sticking to the story that any structural reforms are borne out of a homegrown agenda. In other words, the Egyptian government would rather take responsibility for austerity measures that the president himself acknowledged could be “tough or harsh” than risk looking like it’s being pushed around by the IMF. In times of hardship or instability, people like the idea of strength. A colleague and I recently noted the rising local popularity of loud motorcycles and big dogs. In Alexandria—a city where an overwhelmed drainage system resulted in flash floods that killed seven people last winter—officials recently announced that they were studying the idea of building the world’s tallest building. Even the local currency should not appear weak. This phenomenon isn’t limited to Egypt. Much of Donald Trump’s appeal—I’m told—is that he’s not afraid to challenge anything—even the U.S. Constitution. With his trademark belligerent scowl, the Republican presidential nominee has by turns suggested that America should invade Mexico and build a wall to keep its citizens out. There are some problems, however, that displays of force cannot solve. However officials choose to spin it, the fact remains that if the economy doesn’t turn around, Egypt—and all its 90 million people—are in trouble. Sometimes, the strongest move is to ask for help.

R ACHEL S CHEIER

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Business Monthly – August 2016

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Viewpoint

RESPECT AND FREEDOM

perating in an environment of respect and freedom is the best way to achieve good results for all parties involved in a relationship as well as for those involved in any business transaction. On the opposite end of the spectrum, taking respect out of any relationship is the best guarantee of failure and the root cause of most relationship problems as well as business problems. Respect is an expression of esteem as it incorporates a sense of honor and consideration. For example, any truly successful Employer/Employee relationship is based on mutual respect. Respect for both parties’ rights and the respect for basic human dignity, including our differences, are the best foundation of employment laws. Research as well as practical experience reflects that whether the employer is the government or the private sector, employees who consider themselves valuable stakeholders, because they are treated as such by employers and business owners, produce more and better than those who are scared and feel threatened due to disrespectful treatment. Part of any national development process is to establish fair labor laws, with the protection of productivity being the essential foundation of the legal framework. The misperception that labor laws are designed as the only possible way to protect workers is a fallacy that emerged during revolutions—in reality, the best protection of workers lies in their skills and productivity. By the same token, friendships, partnerships and family relations fail as soon as respect is removed and stops being an integral part of the equation. It is likely that many spousal relationships would have not been broken if mutual respect rules had been observed. The same rules apply at all levels of business, whether on the micro or macro scale. Attracting foreign direct investment is a direct function of many forms of respect, including investor appetite for risk, the investment environment and the outcome goals of both the investor and those receiving investment. Any

investment relationship must incorporate consistent respect for the parties’ objectives as well as local and international rules and legal frameworks. In this day and age, where individuals and companies have a choice and the freedom to invest anywhere in the world, any country desiring foreign investment must offer at least the same benefits available elsewhere, such as ease of entry, exit and repatriation of earnings. If a country does not offer these safeguards for investors, the vision a country’s leadership and business community have for its projects will continue to simply be wishes that never materialize. Moreover, any addition of bureaucracy and corruption will end on the negative side of consideration for investors as those issues represent a major lack of respect for time and money for any potential investor. Just as individuals like to know that the partners they select are honorable, respectable, enjoy a decent track record and have demonstrated functional capability, countries must know that the investors they hope to attract deserve the same. It is up to the countries, as those seeking investors, to use all possible tools to guarantee the soundness and safety of any investment by outside investors. Although leaders in some developing countries consider the basic principles cited above as an invasion of their country’s sovereignty, the reality is that if countries want to attract investors, they must support basic respect, transparency and freedom for investors—that is how individuals and companies screen investment destinations and make their decisions. The World Bank’s “Ease of Doing Business” reports are a reflection of the assessments of the characteristics named above. Any country’s leadership which has visions of grandiose projects without the total understanding of what the world markets need is wasting its valuable efforts. I hope that as Egypt moves forward, we endeavor to satisfy and respect our clients’ needs and goals instead of attempting to sell whatever we have at the prices we unilaterally want to impose. Respectfully, A NIS A. A CLIMANDOS

President, AmCham Egypt

Business Monthly – August 2016

Egypt seeks $12 billion IMF loan

VAT law goes to parliament

Long-standing plans to transition from a general sales tax to a fully-fledged valueadded tax reached another landmark last month when a new draft VAT law was put before parliament. As of press time, the draft law and accompanying tax tables had not been publicly released, although parts of it were reportedly leaked to the local media. Despite the overall lack of clarity about provisions in the new law, it has already created quite a stir. At a July 19 press conference, Deputy Minister of Finance for Tax Policy Amr al-Monayer said the base tax rate in the VAT draft law stands at 14 percent, compared to 10 percent under the current sales tax, raising

Business Monthly – August 2016

fears that the tax will accelerate already sky-high inflation—worries officials tried to calm by noting that many basic items will remain tax exempt. Investment and business associations, meanwhile, have raised concerns about other aspects of the law, including a LE 500,000 minimum threshold for investment. The details of the legislation still need to be discussed and approved by parliament, leaving the possibility of substantive changes to the basic tax rate and the exemption threshold.

Inflation at highest level since 2009

The annual rates for both core and headline consumer price inflation hit

BUSINESS MONTHLY ARCHIVES

After months of rumors, Egypt’s cabinet finally confirmed in a July 26 statement that the country is in negotiations with the International Monetary Fund for a three-year financing package. Egypt is seeking $12 billion in loans from the IMF at an interest rate of 1 to 1.5 percent, finance minister Amr Garhy clarified in a television interview. The loans are to be part of a larger, $21-billion financing package that includes international bond issuances, support from the World Bank and African Development Bank and floating shares in public sector enterprises. An IMF team arrived in Cairo July 30 to continue negotiations. Officials haven’t tied the IMF negotiations to specific economic reforms, but noted that the financing is intended to support the Egyptian government’s economic plan, which includes adopting a value-added tax, passing a new civil service law, restructuring subsidies and reducing Egypt’s reliance on imports. The loan, Garhy said, will help meet Egypt’s financing needs and serve as a stamp of approval from the IMF that will encourage an inflow of funds from foreign investors.

seven-and-a-half-year highs in June, although monthly inflation slowed after spiking in May. Annual headline CPI hit 13.97 percent—the highest rate since January 2009—compared to 12.3 percent in May, according to Central Bank figures. By contrast, the monthly headline rate eased to 0.78 percent in June, compared to 3.05 percent in May. Annual core inflation hit 12.37 percent in June—the highest recorded since February 2009—compared to 12.23 percent in May, while monthly core inflation decelerated to 0.74 percent, compared to 3.15 percent in May. The Bank attributed this combination of a high annual rate and relatively low monthly increase in part to unfavorable base effects from the

In Brief

previous year. June also saw increases in food and clothing prices, due in part to Ramadan spending and preparations for the Eid festivities.

Egypt’s contentious Civil Service Law—a piece of legislation that prompted rare street protests last summer—was approved by parliament on July 25. The legislation was rejected by parliament in January and sent back to the cabinet for revisions. The version approved by lawmakers in July contains several key amendments, including capping annual salary increases at 7 percent annually, instead of the 5 percent initially proposed, and setting increases for incentive-based bonuses at 5 percent instead of the two percent previously offered. The law, which aims to rein in spending on public sector wages and link compensation to employee performance, is one of the cornerstones of the government’s economic reform plan.

BoP, current account deficits widen

Egypt’s balance-of-payments deficit widened to $3.6 billion during the first three quarters of the 2015/16 fiscal year, a period spanning July 2015 to March 2016. In the same period a year earlier, the balance-of-payment deficit stood at $1 billion. The widening deficit was driven by the current account deficit, which reached $14.5 billion, compared to $8.3 billion a year earlier, the Central Bank announced. Egypt’s current-account deficit continued to be driven by a trade deficit, which reached $29.3 billion during the three quarters in question. This was slightly smaller than the $29.5 billion trade deficit recorded in the same period last year, with a drop in Egypt’s import bill outpacing a decline in export revenue. Tourism revenues posted a sharp decline during the period, down 40.5 percent yearon-year at just $3.3 billion. The steepest drop came during January to

BUSINESS MONTHLY ARCHIVES

Parliament approves civil service law

LAWMAKERS OK’D EGYPT’S CONTROVERSIAL CIVIL SERVICE LAW.

March, when revenue plunged by 62.2 percent year-on-year to reach just $550.5 million. Significantly, the quarter marked the first time the Central Bank has recorded a net outflow of tourism payments, with Egyptians spending around $1.2 billion on outbound travel. Foreign aid and worker remittances were also down, as were Suez Canal revenues. Egypt’s capital and financial accounts performed better, recording a net inflow of $13.9 billion compared to $6.6 billion the year before.

PMI declines again in June

With output and new orders continuing to decline while inflation and input costs rose, businesses surveyed for the June edition of the Emirates NBD Purchasing Managers’ Index reported that conditions in Egypt’s non-oil sector deteriorated during the month. June marks the ninth consecutive month that the PMI has indicated a decline. At 47.5, the June index score marked a marginal decline from the 47.6 rating recorded in May. Any score below 50 indicates that business conditions got worse during the month. “June’s survey suggests the Egyptian economy

continued to slow at the end of fiscal 2015/16, with the tourism sector appearing particularly weak. As we start the new fiscal year in July, hopes for a stronger recovery will depend in large part on whether a solution to the ongoing FX liquidity crunch can be found in the near term,” said Jean-Paul Pigat, senior economist at survey-sponsor Emirates NBD, in a press statement.

CBE holds interest rates steady

Following a 100-basis-point rate hike in June, the Central Bank of Egypt’s Monetary Policy Committee elected at its July meeting to hold benchmark rates steady. Despite the spike in annual inflation figures in June, the Bank’s overnight deposit rate will remain at 11.75 percent, its overnight lending rate at 12.75 percent, and the rate of the CBE's main operation at 12.25 percent. The discount rate was also kept steady at 12.25 percent. “At this juncture, the [committee] judges that the key CBE rates are currently appropriate given the balance of risk surrounding the inflation and GDP outlooks,” the MPC wrote in a press statement. The decision to hold rates

Business Monthly – August 2016

In Brief

ST RE E T SE N SE How have rising prices affected you? I have cut out expensive restaurants, but I have yet to compromise on groceries; thankfully I can still buy those on what I make. As for things like buying clothes and going to the movies, I am trying to keep them to an absolute minimum. My mobile is barely working and needs charging every four hours, but I am not planning on replacing it any time soon. Tamer Yassin, 37, market researcher

Unfortunately, there is nothing to do but pay for the failure of the government to keep basic items affordable. I am only buying basic food for sustenance—nothing more. I am trying to increase my income by working more hours, but it’s not easy because I have fewer customers than before. I was advised by a friend of mine to go to a charity group to seek help. Other than that, I really don’t know what else to do except beg for money. Mohamed Ibrahim, 40, freelance handyman I didn’t have enough money even before prices went up. I am living on assistance from charity groups. I have nothing, no income at all, because I can’t find a job. And I don’t want to beg. So I volunteer at these groups, and if I need some food or a piece of clothing, they give it to me. I have a daughter who works as a cleaner in a supermarket, but she barely makes enough to cover her transportation. Fathya Desouky, unemployed I am struggling massively right now. I manage to cover my transportation costs, but I have stopped going out except maybe for some juice from the cart at the street corner. Every few months, I splurge on some cheap accessory from a downtown street vendor. I need something to relieve my money problems. But I still live with my parents, so at least I don’t have to worry about food. Zeinab Taher, 31, hotel maid Thankfully, my salary is high enough that I can still spend and have money left over. But every month, I’m saving less than I used to. Some things have become ridiculously expensive, and so I’ve stopped buying them even though I can afford to. Why pay more than LE 8,000 for a phone? Why go to a restaurant when main courses cost more than LE 200? Since prices went up during the month of Ramadan, I have also started giving out more money to groups that help the poor. I am extremely lucky to have a good job, and I realize I need to increase my support to those who are less fortunate. Ismail Ghaleb, 50, investment banker

COMPILED BY TAMER HAFEZ

Business Monthly – August 2016

BUSINESS MONTHLY ARCHIVES

My husband works in Dubai and sends me dollars, so my standard of living is about the same as it was a year ago. I am still trying to save as much as I can because his contract ends next year, and he will return to his regular job here in Egypt, and I am not sure about what will have happened to the pound by then. I have cut out eating in fancy restaurants. I still make occasional expensive purchases—a new mobile or a handbag, for example. But I have to really need it. Yassmine Rady, 29, housewife DISAGREEMENTS BETWEEN OFFICIALS AND INVESTORS HAVE IMPERILED EGYPT’S FEED-IN TARIFF.

was in line with predictions by the majority of economists surveyed by Reuters and Bloomberg, but many still believe a rate hike is likely to come in tandem with an IMF program later this year.

Poverty level Increases

The percentage of Egyptians living in poverty rose to 27.8 percent in 2015, up from 26.3 percent in fiscal 2012/13 and 25.2 percent in 2010/11, according to data from the 2015 Household Income, Expenditure and Consumption Survey by state statistics agency CAPMAS. The official poverty line was reset during the period, rising from LE 326 per month in 2012/13 to LE 482 per month in 2015, to reflect the rising cost of living. The report also highlighted the gap between the wealthy and the poor in Egypt, finding spending by the top 10 percent of earners amounted to 25 percent of the national total, while the poorest decile’s share of spending amounted to just 4.2 percent of total consumption. Per capita, people in the lowest bracket spend an average of LE 3,323 a year, while individuals in the highest decile spent an average LE 23,086 per year.

Solar investment hits stumbling blocks

Plans to attract private investment in Egypt’s renewable energy sector through a 2014 feed-in-tariff law have run into trouble as Egypt’s government and potential investors have fallen out over arbitration mechanisms and currency concerns. According to Al Borsa, the government intends to stand firm in its insistence that investors agree to submit any disputes for domestic arbitration, rather than seeking redress in international tribunals. After failing to reach an agreement on the issue, the International Finance Corp., the European Bank for Reconstruction and Development and the OPEC Fund for International Development backed out of funding some feed-in-tariff projects and have threatened to make further cuts. On the development side, Italy’s Enel Green and Saudi-based Abdul Latif Jameel Energy have exited the country, while the UAE’s Access Power is reducing its investment from 150 mw to 50 mw. Egypt’s electricity ministry will meet with energy investors in the coming weeks, the Daily News Egypt reports, but some in the industry warn that the entire first phase of the feed-in tariff could fall apart. �

THER E I S A R ENA I SSA NCE AT R I STOR A NTE TUSCA N Y.

E L EG A N T ‘ B E L L E E P O Q U E ’ A N D A W E LC O M I N G R U ST I C WA R M T H … B OT H C A P T U R E T H E E S S E N C E O F T H I S I TA L I A N R EG I O N W H E R E SIMPLE, WHOLESOME FOOD IS P A R T O F T H E H E R I TA G E .

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Region Notes Caspian Sea

Black Sea

TURKEY

TUNISIA

MOROCCO

Mediterranean Sea

CYPRUS LEBANON

SYRIA

IRAN

IRAQ

ISRAEL JORDAN LEBANON

ALGERIA LIBYA

SYRIA

KUWAIT PALESTINIAN TERRITORIES

ISRAEL EGYPT JORDAN

Persian Gulf

BAHRAIN QATAR UAE

SAUDI ARABIA

OMAN

Red Sea SUDAN

YEMEN

Arabian Sea

Map intended for illustrative purposes only and may not accurately depict national boundaries or disputed territories.

SOUTH SUDAN SUDAN

Atlantic Ocean

� IMF grants Morocco $3.5-billion credit line

� Turkish gov’t downplays fallout from coup attempt

For the third time since 2012, the International Monetary fund approved a credit line for Morocco under the Precautionary and Liquidity Line, an arrangement designed for countries the Fund believes are vulnerable to external shocks but have sound economic fundamentals and policies. The two-year, $3.47 billion agreement signed last month follows PLL deals for $6.2 billion in 2012 and a $5 billion in 2014. IMF officials credited Morocco’s “significant strides in reducing fiscal and external vulnerabilities and addressing medium-term challenges,” for the successively smaller credit requirements. Moroccan officials say they will treat the arrangement as precautionary and won’t draw on the funds unless the country faces real balance of payment needs. Morocco’s deal follows a $2.9-billion loan secured by Tunisia in June, while Egypt is currently negotiating with the IMF for a $12-billion loan.

In the days following a failed military coup against the government of Turkish President Recep Tayyip Erdoğan, credit ratings agency S&P downgraded Turkey’s sovereign credit rating, warning that rising political uncertainty could scare off investors. Moody’s also put Turkey under review for a possible downgrade. A three-month state of emergency was imposed, tourists scrambled to cancel trips, markets plunged and the lira hit a record low against the dollar. Despite these setbacks, Turkish officials are adamant that the country’s economy will bounce back quickly. “Life of ordinary people and businesses will go un-impacted, uninterrupted, business will be as usual,” wrote Deputy Prime Minister Mehmet Simsek on Twitter. Economy minister Nihat Zeybekci described S&Ps “rush” to downgrade Turkey’s credit as “incomprehensible,” and the Central Bank maintained its estimates for year-end inflation.

Business Monthly – August 2016

� Saudi Arabia shipbuilding comIndian Ocean plex moves forward Plans to build a maritime complex on Saudi Arabia’s east coast are moving forward, officials announced last month. Final agreements will be signed “over the next few weeks and months,” energy minister Khalid al-Falih told Reuters on July 17. The world's largest oil exporter should own the largest oil shipping company, with a fleet that matches the kingdom's oil reserves and sales, Falih added. In January, MoUs for the project were signed by the stateowned oil company Saudi Aramco, the publicly controlled Shipping Co. of Saudi Arabia (Bahri), a subsidiary of UAE-based engineering firm Lamprell Plc and South Korea's Hyundai Heavy Industries Co Ltd. The complex is due to be operational in 2021 and is among the first large projects announced as part of Saudi Arabia’s Vision 2030 plan, which aims to diversify its economy beyond the petroleum industry. Officials say the complex could eventually create 500,000 jobs. �

WILL PRICE HIKES HURT EGYPT’S SNACK SECTOR?

BY TAMER HAFEZ

gypt is running short on fuel, dollars and water, but when it comes to snack foods, its citizens are spoiled for choice. Chipsy, Cheetos, Borios, Todos, Sand Bites— the kiosks of Cairo are a veritable circus of colorful, cheap packaged foods. On weekdays, office workers

20 I

Business Monthly – August 2016

and taxi drivers alike eat from the koshk, often making meals out of nothing more substantial than a strawberry yogurt and a bag of Doritos. Every few weeks, new products hit the market, and snacks vary from region to region. Mohamed Abdel Aal, who used to run a kiosk in a village in Assiut but is in the process of moving his operation to Agouza, cites a potato-based snack

called Windows that was his best seller in the countryside. In the lean years since the 2011 revolution, so-called fast-moving consumer goods—which include everything from milk to gum—have been one of the few sectors to thrive in an otherwise struggling economy. In recent years, local packaged foods leaders like Domty, Juhayna and Edita have gone public and

ALFRED ALFONS

INFLATION

In Depth

expanded their reach with new factories and lines. While other industries have been forced to contract as incomes dwindle, cheap snack foods have flourished. In 2011, the year of the revolution, Egyptians spent LE 8 billion on “salty snacks, sweets and other treats,” according to a report by the United States Department of Agriculture, noting that this amounted to a 5-percent year-onyear increase in sales. Egyptians consume an estimated 130,000 tons of snacks annually, with potato chips and other salty snacks leading the market. The industry has continued to attract new investors, with new brands entering the market all the time. “This sector has also proven to be a good investment, especially post- revolution, as it has managed to maintain growth despite the economic and political upheaval,” wrote the USDA. Edita, a leading snack food firm, notes on its website that the Egyptian snack market grew by more than 27 percent between 2010 and 2015. The key to the sector’s success is low prices; quick, cheap foods have obvious appeal in a young country with a massive population of poor people. So it was notable that two local market leaders, Juhayna and Domty, recently indicated that they would raise prices to keep pace with inflation. Juhayna CEO Seif el-Din Thabet told reporters from Al Borsa newspaper and Daily News Egypt in June that the dairy and juice firm was considering a 20-percent price hike across the board in response to rising costs. The Arabian Food Industries Co., or Domty, which specializes in packaged white cheese, raised prices 4 percent on some products in the second quarter of 2016, while the firm plans a 10-percent rise on other products before the end of the year. Inflation has reached record levels in Egypt in 2016. The entire market will soon follow suit, according to two April notes by Beltone Financial and Prime Capital Investment Banking. Such rises will test the resilience of the market. “Low-income consumers are the driving force behind the FMCG sector growth,” says Mohamed Adly, head of the Azadia Group. “How much lowincome citizens are willing to spend on such goods is currently the burning

question in the industry.” Mohamed el Damaty, Domty’s vice-CEO, stressed that “Our plan is flexible. It really depends on the foreign exchange rate and currency black market at decisionmaking time.” He acknowledges that “We have to be very careful when increasing prices, because we see that the elasticity of the market is nearing its breaking point, where higher prices would mean severely lower sales.”

“WE HAVE TO BE VERY CAREFUL WHEN INCREASING PRICES, BECAUSE WE SEE THAT THE ELASTICITY OF THE MARKET IS NEARING ITS BREAKING POINT.” Egypt’s 90-million-strong population is growing at a steady pace of 2 percent per year, and with 70 percent of its citizens under 30 and more than half below or near the poverty line, Egypt is considered a high-growth market for frozen foods, beverages and other such packaged products. As of 2013, Egyptians were the second-highest spenders in Africa on fastmoving consumer goods after Nigeria. Global urbanization has fed the packaged food industry worldwide, as people eat less home-grown food. Emerging markets are particularly ripe for growth. In 2015, American cereal giant Kellogg bought a majority stake in Bisco Misr, Egypt’s number one cookie company, earning some $125 million for the local firm’s shareholders. The IPOs of Domty, Juhayna and Edita, which all went public in the last 12 months, were well received by the bourse. The IPO of Domty was covered 10.7 times over, raising LE 1.13 billion, Juhayna’s LE 192 million market debut was oversubscribed 6.8 times, and Edita’s 4.5 times, raising nearly LE 23 million. “The coverage was solely because these companies work in the packaged and manufacturing food business, which is highly resilient and its profits have a very good track record,” says Essam Khalifa,

managing director and board member of the National Fund Management Co. In 2015, Domty net profits were up 9 percent, Juhayna’s 65 percent and Edita’s 30.7 percent. Obour Land, another white cheese maker, announced in July that it will go public before the end of the year. All four companies said they need the money to expand their domestic operations and build new factories as well as diversify into new food and beverage categories. However, a factor that could potentially slow this growth is these firms’ heavy dependence on imported ingredients and materials, according to Moawad Omran, a member of the FMCG division of the Union of Trade Chambers. Egyptian packaged-food and beverage producers import an average of between 40 and 50 percent of their raw materials, from fruit concentrate to packaging supplies. The fact that such materials have to be paid for in hard currency—which has become increasingly rare and expensive in Egypt—could expose such companies to the same pressures experienced by other local manufacturers recently. In the last three months alone, costs for packaged foods producers are up an estimated 20 to 25 percent. “They will have the option to determine whether or not, and by how much, to pass on these cost increases,” says Omran. Domty, for one, plans to build its exports—which traditionally benefit from a cheap local currency—to help counteract this growing cost pressure. Domty already exports its other products to 35 countries. But Damaty acknowledges that there is a lot of competition. “A lot of our Egypt-based competitors have the same idea,” she says. Juhayna, which already exports to Europe, the United States and elsewhere in the Middle East, is thinking about expanding to East African markets like Kenya and Tanzania. Moreover, Thabet, who took over the helm of Juhayna this year from his father, the company’s founder, presided over a June deal signing with Fawry, Egypt’s electronic payment leader, to speed collections for Juhayna vendors. He told the Daily News Egypt that the company needs a “different and balanced vision” to cope with

Business Monthly – August 2016

ALFRED ALFONS

In Depth

Egypt’s difficult economic circumstances. According to analysts, Juhayna has overstocked its raw materials and intermediate goods inventory since the end of last year, anticipating a further devaluation of the pound. “The rising inventory is hedging them against local price increase,” says Nancy Ghabriel, a researcher at Beltone Financial. Not everyone believes raising prices is inevitable. Hassan Ghaly, the chairman of the Hassan & Hussein Group, which sells inexpensive frozen meat and vegetables locally and abroad, believes that keeping prices low is critical to maintaining sales. “In our market, our sales are very dependent on the consumer price,” says Ghaly, who stresses that his company refuses to compromise on quality. So in order to keep prices stable, Ghaly says the firm’s strategy is instead to upgrade production facilities to lower operations costs to compensate for the rising expense of raw materials. He acknowledges that keeping prices low will be a challenge if costs continue to rise, since the company already has very tight margins. “That is something we accept,” says Ghaly. “The way we see it is that we can’t let poor people be the victim of prices spiraling out of control.”

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Analysts point out that some of the government’s moves to offer discounted food to Egyptian citizens to compensate for price hikes have effectively hurt one of the country’s most profitable industries at a time when the economy needs the private sector. Last year, Army discount food outlets that traditionally offered cheap frozen food and beverages exclusively to military personnel were opened up to the public, undercutting market prices by as much as 25 percent. “I think the underlying message they wanted to get across is that packaged and frozen foods and beverages can be sold at much lower prices,” says Ashraf Hosney, a member of the food products division at the Cairo Chamber of Commerce. While it might provide some relief to the poor to offer food and beverages at cost, the discount outlets have contributed to Egyptian consumers’ belief that products are cheaper than they actually are. “Input costs for the Army are lower than for private firms,” says Amr el Alfy, an analyst at MubasherTrade, who points out that the military enjoys tax-free status and a free workforce, among other advantages.

Meanwhile, even more cost increases may lie ahead for the packaged-foods industry. Egypt’s long proposed valueadded tax, currently under review by parliament, is likely to raise costs for such companies, analysts agree. Alfy explains that the VAT, which Prime Minister Sherif Ismail has said is likely to be implemented by October, would tax previously untaxed parts of the production chain. Moreover, a new food safety law that was passed recently following a national scandal about donkey meat being passed off by local butchers has shown a spotlight on the lax oversight of food production, despite there being some 17 food safety monitoring bodies in Egypt. “There will be producers who will have to increase their prices to meet the standards,” says Damaty. Nonetheless, Egypt’s packagedfoods sector is likely to weather these challenges in the long term, according to Alfy, who says that as long as locally produced snacks remain cheaper than imported ones, their producers will stay in the black. Companies will raise prices gradually, and ultimately, consumers will absorb them. “Prices have gone up throughout history,” he says.

BUSINESS MONTHLY ARCHIVES

FINANCE

FOR SME LENDING, BANKS LOOK NORTH BY TAMER HAFEZ

n the ground, Salem Art for Woodwork is the model of a successful small business. Located in Egypt’s woodworking hub, Damietta, it employs 30 craftsmen spanning three generations. It buys most of its materials locally and exports around 90 percent of its chairs and table fixtures to Cyprus, where it supplies small hotels, restaurants and shops. “The Cypriots seem to like our work and we are getting more requests,” says Saleh Salem, the company’s CEO. However, Salem can’t grow his business without access to capital, and Salem Art for Woodwork

can’t get a bank loan because, like the vast majority of Egyptian SMEs, it’s not registered. “I can’t take out a loan because I am an informal business,” Salem explains. While SMEs account for an estimated 90 percent of Egypt’s economy, they have long struggled to gain access to financing—a problem that has become particularly acute in the last five years, as Egypt’s economy spiraled downward. Recognizing that solving it is key to creating jobs and spurring growth, the Central Bank, at the behest of President Abdel Fattah el-Sisi, announced in January that it was

launching a “comprehensive program” to encourage banks to lend money to small businesses. “Banks have long perceived SMEs as highly risky,” says Naglaa Bahr, the CEO of Credit Insurance Co. a firm that insures banks against loan defaults. According to Bahr, around 80 percent of SMEs that apply for financing are rejected. “The deficit has traditionally gotten bigger the further away from Cairo the business is,” he adds. But the perception of businesses outside Cairo as riskier may not necessarily be true. While SMEs in developing countries have traditionally recorded

Business Monthly – August 2016

In Depth

high default rates, there are notable exceptions—and identifying what kinds of small businesses are likely to make reliable borrowers are key to banks in light of the CBEs recently announced SME lending plan, which requires banks to increase loans to small firms to 20 percent of their total portfolios by 2020, up from 8 percent at the end of 2015. According to a June report by the state-owned National Bank of Egypt, SMEs in the Delta and the North Coast are four times less likely to default on loans than their Cairo-based counterparts and twice as likely to pay back their debts on time than large firms generally. The data is based on the portfolios of several state-owned banks. In an interview, Yehia Aboul Fetouh, a deputy chairman at NBE, explained that the default rate for SMEs in this region dropped from 60 percent in 2008 to just 1.5 percent at of the end of 2015. By way of comparison, NBE’s overall loan default rate was 6.8 percent last year. In a speech, the president claimed that the new SME lending plan would benefit “350,000 companies that will offer job opportunities to more than four million people.” Banks will not be allowed to charge more than 5 percent interest on these loans, which is less than half the benchmark interbank lending rate and well below the consumer market rate of 15 percent. In exchange, the Central Bank will lower reserve requirements for participating banks, allowing them to deduct the money they loan to SMEs from their required cash reserves, providing banks with an incentive to loan to microenterprises (companies with less than LE 1 million in annual revenue and fewer than 10 employees), small enterprises (no more than LE 20 million in annual revenue and 200 employees) and medium enterprises (up to LE 100 million a year and 200 employees). Salem observed that the government has a long record of vague announcements on supporting SMEs but little action. Since the new regulations were announced in January, commercial banks have shifted their SME lending activities into high gear. “This is the first

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time we have limits on our portfolio,” says Mounir el Zahid, chairman and CEO of the state-owned Banque du Caire, adding that the bank will coordinate between its corporate and SME loan departments to “make sure that both are working at a comparable pace to reach the percentage decreed by 2020.” In 2016, Banque du Caire aims to exceed the LE 2 billion it loaned to small businesses last year. The NBE, meanwhile, says that in the first half of 2016, its SME lending was up 34 percent over the first half of 2015, amounting to LE 8.3 billion lent to 16,000 enterprises.

“WE ARE THROWING AWAY A MASSIVE OPPORTUNITY BY NOT FINDING A WAY TO LEND TO INFORMAL BUSINESSES THAT HAVE A SOLID EXPORT MARKET.” In the private sector, Commercial International Bank, Egypt’s largest private bank, aims to add LE 1 billion in SME financing this year, bringing its annual total to LE 5 billion. Speaking to Al Mal in August, Rashwan Hamdy, head of banking services at CIB, said that to meet the new targets, the bank will have to issue loans to 70,000 to 80,000 small businesses, up from 30,000 currently. “Even if no one will admit it, banks have entered crisis mode since the announcement was made,” says Bahr. “The time-frame is limited, and they are being asked to lend to businesses they deem the riskiest.” Indeed, international credit rating agencies have noted that the “20-percent target will likely weaken loan performance, a credit negative for Egyptian banks,” as Moody’s put it in a January report. The Central Bank has directed banks to prioritize SMEs that work in industry, make foreign exports and are labor intensive—like Salem’s. At NBE, the

encouraging data on Delta and North Coast SMEs has influenced its lending practices. In the first half of 2016, businesses from the region received nearly a third of the bank’s total SME loans, followed by Upper Egypt-based enterprises, which got 27 percent. Cairo-based SMEs received slightly less than 10 percent of its SME financing. Moataz el Tabaa, executive director of the Alexandria Business Association, says it’s easier for companies to build reputations in the smaller, less crowded regional marketplace—especially among vendors who can ship their products abroad. “These companies are small and cater to a small market segment,” says Tabaa. Many of these businesses depend on keeping their prices low, so margins are tight, says Ahmed Magdy, an independent financial consultant who advises SMEs in the Nile Delta. “This is why business owners are willing to pay out of pocket to maintain their reputations for financial stability,” says Tabaa. “Cairo, on the other hand, is a very big market,” he says. “There, SMEs can easily find new clients or suppliers.” The Delta—which consists of a handful of cities surrounded by smaller villages connected by a relatively functional transportation network—is well positioned near the Mediterranean coast, at the intersection of three continents. SMEs can locate themselves near urban centers where products are sold or shipped and still attract a cheap workforce from nearby villages. “This slashes operating costs and hence lowers the prices of products,” says Gomaa. Salem, for example, enjoys a large supply of nearby skilled woodworkers to make his furniture as well as proximity to a port from which he can export his finished products. “My business and cost set-up wouldn’t work anywhere else,” says Salem. Even SMEs that cater exclusively to the local market can do well, because the various sectors are less saturated than in the capital. Moreover, the regional infrastructure is relatively reliable. “They don’t have problems buying and maintaining equipment, securing energy, sewage,

BUSINESS MONTHLY ARCHIVES

In Depth

transportation or have other tedious problems similar to those faced in other regions,” argues Ali Gomaa, head of the Social Fund for Development’s regional office in Alexandria. “I am not sure why life is easier for manufacturers there, but it is.” He says that in the first three months of 2016, the SFD allocated LE 15 million in loans to projects in the Delta and North Coast region, creating 900 new jobs. The CBE has also told banks to prioritize SME loans in Egypt’s underdeveloped South. “Upper Egypt has the same benefits of being in a small market, but it faces infrastructure problems,” says Gomaa. On the other hand, small firms in the much larger and more diffuse market of Cairo tend to be much less stable, with new SMEs constantly opening and failing. It’s not uncommon for such outfits to “close the business and start a new company rather than repay the debt,” he says. Still, identifying creditworthy SMEs outside Cairo is difficult, says Hamdy Azzam, a board member at the Industrial Development & Workers’ Bank, mainly because there is simply more accessible market data available about Cairo companies, which have a

relatively larger digital presence. Outside the capital, banks must consult SME development associations, industry bodies comprised of financial advisors who assess small businesses for creditworthiness. These groups have detailed knowledge about what makes a sustainably successful SME and follow up with new enterprises with the aim of identifying financial problems early, before they default. NBE works with six different such associations in the Delta and North Coast. “They are a very important source of information for us,” says Aboul Fetouh. However, as the example of Salem Art for Woodwork demonstrates, most of Egypt’s SMEs are unregistered, barring them from formal financing no matter how successful. Nader Abdel Hady, head of the SME Development Association in Egypt, says that even outfits that are certified exporters abroad remain largely informal at home— thanks to the infamous amount of red tape Egypt requires to register a business. Salem would love nothing more than to formalize so he could qualify for a bank loan, but the state requires financial documents going back three years, and he simply doesn’t have them. This is by far the biggest barrier to financing for

Egyptian SMEs; businesses small enough to avoid dealing with the government and paying taxes usually do so. “These companies were often able to survive and thrive because they stayed away from the bureaucracy and corruption of the Egyptian government,” says Mahmoud Fouad, head of the furniture and woodworking chamber at the Federation of Industries. He says that two months ago, 40 Damietta-based SMEs applied for the new, low-interest bank loans, but only 10 of them were approved. “Almost all the rejections were because their paperwork was incomplete,” says Fouad. Damietta, home to a proud Egyptian tradition of furniture manufacturing, has some 38,000 workshops, according to the FEI. “We are throwing away a massive opportunity by not finding a way to lend to informal businesses that have a solid export market,” says Abdel Hady of the SME Development Association. “This is the sentiment of every bank manager I’ve sat with in the past six months.” “It’s like there is a glass wall between us and banks,” says Salem. “We can see each other, but we can’t reach each other.”

Business Monthly – August 2016

Business Monthly â&#x20AC;&#x201C; August 2016

Cutting it close

Egyptian textile exports tripled in value in the years leading up to the 2011 revolution. With its natural advantages of geography and a cheap workforce, the local industry should be booming once again, thanks to the weak pound. Why isnâ&#x20AC;&#x2122;t it? By Edmund Bower

Business Monthly â&#x20AC;&#x201C; August 2016

JONATHAN RASHAD

Cover Story

YOU REAP WHAT YOU SEW: THE TEXTILE SECTOR EMPLOYS SOME 1.2 MILLION PEOPLE, ACCOUNTING FOR NEARLY A THIRD OF INDUSTRIAL EMPLOYMENT.

eorge Saad used to work as a tour guide, introducing Italian and English-speaking visitors to Egypt’s ancient Pharaonic wonders and breathtaking Red Sea resorts. But as tourism evaporated after the 2011 revolution, Saad, like so many others, was forced to close up shop. Now he works as a compliance manager at the Swiss Garments’ factory in 10 Ramadan City, which is home to a number of local textile manufacturers. Swiss Garments, which makes men’s suits for export to major international chains like the Gap and Zara, employs around 2,000 people. Saad, 28, confesses that he misses roving about the country with groups of curious foreigners, but in the current climate, he knows he’s lucky to have a job. “Work is getting harder to find in Egypt,” he says, “and the wages are getting smaller.” Before 2011, Swiss Garments’ parent company, Arafa Holding—one of the country’s largest clothing manufacturers—was riding a comfortable boom in

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Egyptian textile exports. Arafa, which specializes in menswear, was filling orders for Macy’s, Pal Zileri and British Home Stores, among others. Egypt’s textile exports reached almost $3 billion in 2011, up from around $1 billion in 2005, according to the United Nations Conference on Trade and Development, with ready-made garments for the European and American markets. “Buyers kept coming from the United States and Europe,” says Arafa’s managing director, Hala Hashem. “There was a lot of interest in Egypt.” In the years since, however, the industry has stalled in the wake of the economic slump that followed the January 25 uprising. Textile exports have mostly stayed flat in the last few years— in 2015, they slid 8.5 percent from the previous year to $2.7 billion, according to the trade ministry. This is notable given the dramatic devaluation of the Egyptian pound, which has lost 35 percent of its official value since 2011. Exports are supposed to benefit from a declining currency, according to classic

economic theory, because their cost goes down for buyers abroad. While Egypt has never gotten close to East Asian clothing-export giants like China and Bangladesh, the textile industry remains key to the local economy. The industry employs around 1.2 million people, accounting for 30 percent of industrial employment. With manufactured exports down across the board, clothes and textiles currently account for some 13 percent of Egypt’s exports—making them its largest nonoil category. Egypt badly needs to bolster exports and foreign investment to solve a worsening hard-currency shortage and spiraling inflation, but industry insiders say that textile exports have remained a mixed picture due to a variety of economic and policy factors. Even as the political situation became relatively stable again in recent years, overseas textile buyers have been scared off by unpredictable government policies and a generally unfriendly business environment. Moreover, the fact that Egyptian textile factories, like other

BUSINESS MONTHLY ARCHIVES

Cover Story

ANY PORT IN A STORM: EGPTIAN EXPORTS ARE DOWN ACROSS THE BOARD, WITH TEXTILES SLIDING 8.5 PERCENT LAST YEAR.

industries, import a high percentage of their materials has cost businesses, as dollars are more and more expensive and in short supply. After 2011, major American chains including Macy’s and J.C. Penney—which had both opened offices in Egypt to facilitate their business—pulled out, according to Hashem. “Buyers stopped coming to Egypt,” she says. “Security is an overriding concern,” says Orestes Vasquez, a senior attaché with the United States Department of Agriculture’s foreign service. Isolated incidents involving tourist fatalities haven’t helped Egypt rebuild its reputation as a safe, stable place to do business. “People are scared, and it’s hurting Egypt big time,” says Vasquez. The country had yet to build its reputation as a major global textile exporter, so it was easier for foreign buyers to write Egypt off after 2011. “If it was a Vietnam or a Bangladesh then people would still be saying ‘We need to get down there,’” he says. Meanwhile, rising fuel prices and a

chronic natural gas shortage has hurt industry in general. Mohamed Kassem, chairman of the Ready-made Garments Export Council of Egypt, estimates that some 1,400 textile factories have shut their doors in the last five years. Large companies like Arafa were better able to stay afloat. Even in the current climate, the companies says it holds 15 percent of the formal-menswear market in the United Kingdom and 10 percent of Egypt’s garment exports. The Swiss Garments factory in 10 Ramadan City buses men and women in daily from around Greater Cairo and the Delta, some of whom leave their houses before dawn to start the work day at 7:30 a.m. On a recent morning, workers were busy using buzz saws and laser machines to cut out puzzle-piece shapes of wool and cotton to be stitched together by other employees operating sewing machines. The suit jackets and trousers are passed down the assembly line to be inspected and affixed with price-tags featuring an already attached “discount” of £80. In order to keep its foreign buyers, the

company has cut prices and increased production to make its exports more competitive. “We used to make 2,400 suits a day,” says Swiss Garments managing director Bassel Abdelrazzak Ahmed. “Now we produce 2,700.” He goes on to explain that “on some orders we make no profit at all. We do it just to keep the client.”

The almighty dollar

Kassem, of the Ready-made Garments Export Council, blames Egypt’s controversial policy of holding the pound relatively steady against the dollar for the fact that textile exports have failed to profit from the cheap local currency. Officially, the pound has dropped from LE 5.79 in 2010 to LE 8.88 as of late July. In reality, however, almost nobody can get their hands on dollars at that rate, and the Central Bank has imposed strict controls on the purchase and transfer of hard currency. So companies that need dollars to import supplies in order to stay in business turn to black market forex dealers.

Business Monthly – August 2016

BUSINESS MONTHLY ARCHIVES

Cover Story

HOMESPUN: FACTORIES LIKE THE CAIRO COTTON CENTER RELY ON IMPORTED SHORT- AND MEDIUM-STAPLE COTTON, WHICH ISN’T GROWN HERE.

Late last month, the pound hit a record low of nearly LE 13 to the dollar on the parallel market—around 46 percent weaker than the official exchange rate—as speculation swirled regarding a further devaluation and firms feverishly tried to get their hands on greenbacks after Central Bank Governor Tarek Amer said publicly in early July that propping up the pound had been a mistake. Facing dwindling foreign reserves and pressure from the business community, the CBE has reluctantly undertaken a series of limited devaluations—the latest of around 14 percent taking place in March, briefly closing the gap with the black market. But the pound has since weakened to record lows on the black market, increasing pressure on the Central Bank to devalue further. “As exporters, we don’t really take advantage of the reduced currency,” says Kassem. A major problem is that the official rate does not reflect the pound’s real value. “When you keep your currency higher than it should be, you’re hurting exports,” says Kassem. “Look at the rest of

Business Monthly – August 2016

the world, look at China. They keep their currency low to boost exports.” Hala Hashem agrees: “The right thing to do is devalue.” At the same time, over the last five years, manufacturing costs have increased. Energy expenses have skyrocketed and living costs are at record highs. Legally obliged to increase wages by 7 percent each year, Hala Hashem points out that labor accounts for nearly a third of Arafa’s overhead. Meanwhile, imports have gotten more expensive due to the falling pound, and most manufacturers in Egypt rely heavily on imported materials. According to Shady Amin, the executive director of the National Council of Textiles, an average of 80 percent of materials in the textile sector are foreign-made. The further the pound drops, “the higher our costs go,” says Amin. Egypt failed to develop enough feeder industries for the textile sector during the gravy days before 2011, say members of the textile industry. In general, while the ready-made garment sector expanded

rapidly, they didn’t invest those profits into building factories that could produce locally made supplies of the goods on which they rely. “We’re paying the price,” says Magdi Tolba, CEO of Cairo Cotton Center, a firm that makes ready-made separates, largely for export. “We didn’t invest properly, and now we are relying on imports.” Hashem, of Arafa, agrees: “We started investing, but we did it too late.” Of the local companies that do make products that the ready-made garment sector needs—spinners, weavers, dyers etc.—around 60 percent are stateowned, according to Kassem, and are not managed efficiently. “They have large numbers of employees that they can’t get rid of,” says Vasquez of the USDA, “and very high absenteeism.” Amin points out that many of these firms are incurring “huge losses.” He adds: “They don’t invest in personnel and their machines are obsolete,” a major problem in an industry that depends on keeping equipment up-to-date in order to remain competitive.

JONATHAN RASHAD

Cover Story

MANUFACTURING DISSENT: ADDING TO THE WOES OF THE TEXTILE INDUSTRY IN RECENT YEARS, WORKERS HAVE STAGED A SPATE OF STRIKES.

With its close proximity to Europe, Asia and Africa, Egypt enjoys a natural geographical advantage in the export of manufactured goods. Moreover, wages are still relatively low. Arafa Holding, for example, pays its factory workers the equivalent of around $120 to $140 a month, including health benefits and social insurance. By way of comparison, textile workers in South Africa, which is currently the third-biggest economy on the continent after Nigeria and Egypt, take home $200 to $270 a month, according to the South African Clothing and Textile Workers’ Union. Numbering nearly 60 million, Egypt’s workforce is the largest in the MENA region, with high levels of unemployment. As a labor-intensive industry, one which employs a relatively large proportion of women, textile and clothing manufacturing has obvious benefits for a country struggling to right its economy. As long as industry growth is stalled, Egypt cannot capitalize on these advantages. “We are neither controlling population growth nor utilizing it,” says Hashem.

Hanging by a thread

The boom of the pre-revolution years in Egypt’s textile industry was helped by two important trade deals. The Egypt-EU Partnership Agreement, which came into effect in 2004, liberalized trade between Egypt and Europe. Meanwhile, the Qualifying Industrial Zones agreement was signed in 2005, which gave Egyptian products made in QIZ zones duty-free access to the United States market in exchange for using a certain percentage of inputs from Israel. These deals were part of what Kassem describes as a “revolution” in government policy towards the textile industry. Efforts were made to reduce taxation for exporters, consolidating the previous progressive tax into a flat corporate rate. The Mubarak government launched “one-stop shops” in an effort to reduce red-tape, and export councils were set up to support industry. The Textile Export Council describes itself as “a public-private partnership organization working under the umbrella of the Ministry of Trade and Industry to promote Egyptian

textile industries internationally.” But industry insiders say many of these reforms didn’t go far enough and the ones that were put in place have since been eroded. Tolba, of Cairo Cotton, points out that there are actually three separate textile export councils—one for fabric, one for readymade garments and one for home textiles (carpets, curtains, etc.)—rather than enabling an efficient single body that could represent the needs of the industry as a whole. “I was always against this, we should have just one representative,” he says. Various capital controls imposed by the Central Bank since 2015 have limited the number of dollars leaving the country and capped foreign currency deposits at banks. But these attempts to shore up Egypt’s hard currency reserves and stamp out the black market have taken a toll on local businesses that need dollars for crucial imports. Earlier this year, in response to the widespread outcry in the private sector, the CBE relaxed the deposit limits—removing a daily $10,000 limit and

Business Monthly – August 2016

lifting monthly limits entirely for staple importers. Still, experts say the currency controls “wrought havoc in an already beleaguered industry,” according to a March report by the USDA’s Foreign Agricultural Service in Cairo. Meanwhile, the gap between the official and black market exchange rates has continued to widen, scaring off crucial foreign investment that analysts agree is the only longterm solution to Egypt’s dollar shortage. “No foreign business wants to work like that,” says Amin of the National Council of Textiles. Meanwhile, a series of policy shifts connected to Egypt’s failing cotton industry has also hurt textiles. Egypt’s most iconic agricultural export has long been on the decline, with cotton production dropping from 2.5 million bales annually in the late 1970s to 970,000 in fiscal 2006/07. An all-time low of 320,000 bales was recorded in 2015/16, while a series of flip-flops by the government have fed questions about the very survival of the Egyptian cotton industry. In early 2015, the state announced that it was ending its longstanding policy of subsidizing cotton farmers, directing them to negotiate a price directly with producers instead. A few months later, in a move that seemed to be aimed at compensating for the damage wrought by canceling subsidies, the agriculture ministry announced that it was banning imported cotton, forcing textile manufacturers to buy local. In reality, it simply shifted the cost of subsidies onto the textile industry. That’s because nearly all local textile factories use the cheaper short- and medium-staple types of cotton used to produce mass market garments, and it isn’t grown here. Egypt is known for its long-staple cotton that goes into high thread-count sheets and other luxury textiles. But processing this long-staple cotton properly requires state-of-the-art machinery the country lacks. The government reversed its ban on imported cotton a week later, in the wake of a predictable outcry among textile factories. “All of us, even the minister of industry, were taken by surprise,” Mohamed Eshra, vice president of the

Business Monthly – August 2016

BUSINESS MONTHLY ARCHIVES

Cover Story

SOFT LANDING: TEXTILES SUFFERED FROM POLICIES MEANT TO SAVE EGYPT’S COTTON INDUSTRY.

textile firm Eshratex, told Mada Masr, adding that other ministries had been surprised by the ban. Even local factories that use long-staple cotton tend to prefer U.S.-grown Pima cotton. “It was a very stupid move,” says Kassem. Other protectionist measures that restrict imports have stayed in place, however. Last August, Egypt imposed stricter standards for imported cotton. Importers must apply for a permit at least a month in advance, and the cotton must be free of whole or broken seeds when it arrives in the country, or it’s sent back. Egypt is the only nation that requires cotton to be fumigated twice for pests—once at the country of origin and again at arrival—a measure the USDA estimates will cost the industry an extra $3 million to $5.5 million this year. These policies are not standard global practice, and many believe they are not only ineffective but also counterproductive, costing Egypt badly needed growth.

“They distort the whole supply chain,” says Kassem. Also true to form, Egypt has a textile megaproject in the pipeline. In May of this year, officials announced the signing of a “framework agreement” between the Egyptian Textile Industries Council and the China National Textile and Apparel Council to build a 1.2-squaremeter “textile city” just south of the Upper-Egyptian city of Minya. Trade minister Tarek Kabil touted the move as an important step in establishing Egypt as a regional textile leader. No other details have been released. The project has spurred familiar skepticism among industry members who say the emphasis should be on solving the problems of existing textile firms rather than building new ones. “The government is always talking about future projects,” says Tolba, “but what about the investments we’ve already made?”

Stock Analysis

Choppy waters

he market continued to trade sideways in the period from June 15 to July 15, but within a wide range,thanks to high volatility. Both the EGX 30 and the EGX 70 recovered from lows recorded at the end of June, having lost 7.6 percent and 5.8 percent, respectively. The former recovered by 10.7 percent and the latter by 6.2 percent. Nonetheless, the EGX 30 ended the period up just 2.3 percent at 7,583.1, while the EGX 70 closed more or less flat at 359.8. Overall, declines continued to outnumber advances, but at a ratio of almost 3-to-2. Foreign institutions turned net sellers during the period, joining Arabs, while Egyptians were net buyers on both the individual and institutional fronts. A closer look at the market’s performance reveals that a few stocks generated double-digit returns despite the flat market. Memphis Pharmaceuticals (MIPH), for example, ended the period up 68 percent at LE 61.92. Pharmaceutical stocks have long been neglected, but lately some investors have been reassessing them in light of recent price hikes by the government, enabling pharmacies to pass on more of the cost of imported goods to customers. Meanwhile, General Silos (GSSC) was up 41 percent at LE 31.96. If the company’s management delivers on next year’s budget, the stock looks

cheap. Meanwhile, Nozha International Hospital (NINH) was up 40 percent to LE 45.19 following the successful IPO of a larger hospital group, Cleopatra Hospital (CLHO). Elsewhere, Global Telecom Holding (GTHE)—a stock that lost glamour two years ago—also advanced 28 percent to LE 3.86 on speculation that VimpelCom might be interested in taking the telecom holding company private by making an offer to buy out the firm’s remaining shares. Meanwhile, stocks benefiting from the strong U.S. dollar continue to perform well. Alexandria Container Handling (ALCN) was up 20 percent at LE 482.46. Also, a stronger dollar makes Egyptian assets cheaper, hence real estate developers like SODIC (OCDI) advancing by 17 percent to LE 12.94. On the downside, one stock stood out: Beltone Financial (BTFH), which fell 28.5 percent during the period. It closed at LE 7.87, following a long uphill journey from LE 4 to LE 20. The stock is now some 60 percent off its April peak after its attempt to acquire the investment bank CI Capital fell apart. Last month, we warned that investors should expect volatility. Indeed, markets are roiling, but in Egypt, the situation is becoming more complex, as foreign investors remain on the sidelines, waiting for the pound to fall further before jumping back in.

IN THE SPOTLIGHT

Nozha International Hospital When a new IPO hits the market, it grabs attention. and helps shine the spotlight on other stocks in the sector. Last June, Cleopatra Hospital went public in an IPO that valued the largest Egyptian hospital group at LE 1.4 billion before an LE 360-million rights offering. Nozha International Hospital (NINH), valued at LE 177 million when Cleopatra went public, has seen its shares jump 70 percent in less than two months. During the third week of June, Nozha traded around 63,000 shares worth LE 2.8 million, jumping 55.5 percent from LE 32.34 to LE 50.29, valuing the hospital at more than LE 300 million.

Business Monthly – August 2016

Market Watch

Capital Markets Egyptian price indices - EGX 30

7583

EGX 30

Egyptian price indices - EGX 70

360

EGX 70

Selected sector performance

Business Monthly â&#x20AC;&#x201C; August 2016

Market Watch

Capital Markets Corporate News TE to buy 4G license Telecom Egypt (ETEL) tentatively accepted the state’s terms for 4G frequencies. According to an official at the Ministry of Communications and Information Technology, the government plans to stick with its former requirement that companies pay half the money for 4G license in dollars. On a related note, TE will inject around LE 10 billion in the network during the first year of providing mobile services. The state-owned landline operator isn’t expected to break even in mobile services for six years.

VimpelCom and Dhabi complete Mobilink-Warid merger in Pakistan VimpelCom and Global Telecom Holding (GTHE) along with Warid Telecom Pakistan and Bank Alfalah (Dhabi Group shareholders) announced the completion of a merger between Pakistan Mobile Communications Ltd. (Mobilink) and Warid Telecom, creating Pakistan’s first nextgeneration digital telecommunications provider. More than 50 million customers there will benefit from high-speed mobile telecom and a best-in-class digital mobile network, according to the firms. The combined Mobilink-Warid entity will be the leading provider of 2G, 3G and LTE services in Pakistan, offering higher quality national voice and data coverage, faster downloads and a wider array of products and services. VimpelCom plans to invest $1 billion in the new firm.

Arabian Cement scraps ASCOM acquisition The Arabian Cement Company (ARCC) said its board of directors has scrapped plans to acquire 99.9 percent of a company owned by ASEC Co. for Mining (ASCM) offering quarry products. The board said the decision came after reviewing the findings of the due diligence process.

Industrial authority extends approval of EFIC's Suez Canal project The Egyptian Financial & Industrial Company (EFIC) said it has received an extension from the Industrial Development Authority regarding its approval of the company’s planned new facility in the Suez Canal industrial zone. The project's approval was extended through next July.

EFG Hermes sells another 4.1 percent of Credit Libanais EFG Hermes Holding (HRHO) said it sold an additional 4.1 percent of its shares of Credit Libanais at $33 each (before fees), the same price as an initial sale of the stock. After the sale, EFG Hermes will hold 19.5 percent of Credit Libanais’ shares. EFG Hermes is advising on 13 merger and acquisition deals valued at some $1.5 billion as of the end of the first half of 2016.

Sheeni taps new market to shore up exports The General Company for Ceramic & Porcelain Products, or Sheeni (PRCL), is tapping new markets to increase its exports following the sharp drop in sales to war-torn Libya, Syria, Iraq and Yemen. The company is currently in talks with Italy, Nigeria and Morocco.

TAQA Arabia considers new solar power plant TAQA Arabia, a subsidiary of Qalaa Holdings (CCAP), is considering building a new 50-megawatt solar power plant, in addition to another 50-megawatt solar facility the company seeks to implement in Aswan at a cost of $75 million. TAQA Arabia for Solar Energy had signed a contract with the Egyptian Electricity Transmission Co. and the New & Renewable Energy Authority to split the LE 40-million project to connect solar energy facilities to the national electricity grid.

International stock price indices July 15

June 15

April 15

Feb.15

value

% change

value

% change

value

% change

DOW

18,516.00

17,640.00

4.97%

17,897.00

3.46%

15,973.00

15.92%

NASDAQ

5,029.59

4,834.93

4.03%

4,938.22

1.85%

4,337.51

15.96%

S&P 500

2,161.74

2,071.50

4.36%

2,080.73

3.89%

1,864.78

15.92%

FTSE 100

6,669.24

5,966.80

11.77%

6,343.75

5.13%

5,824.28

14.51%

NIKKEI 225

16,497.85

15,919.58

3.63%

16,848.03

-2.08%

16,022.58

2.97%

Business Monthly – August 2016

Market Watch

Money & Banking INTEREST RATES

BANKING & RESERVES (in millions of LE) 2015

2016

September

October

November

December

January

February

March

Apri

Reserve Money

424,431

425,386

431,665

420,638

418,881

410,150

430,378

442,281

Int'l Reserves (net, US$ mln)

16,415

16,423

16,445

16,478

16,534

16,586

17,011

17,521

Domestic Liquidity

1,850,305

1,868,174

1,876,828

1,905,464

1,909,422

1,922,685

1,987,839

2,006,632

Foreign Assets (net)

1,329,020

1,348,830

1,361,759

1,384,872

1,391,490

140,230

1,457,994

1,466,460

Domestic Assets

1,850,305

1,868,174

1,876,828

1,905,464

1,909,506

1,922,685

1,987,839

2,006,632

17.84

17.99

17.49

17.28

17.29

17.03

18.77

18.83

End of

Dollarization Rate (%) Discounted Bills (except CBE)

4,334

4,295

4,419

4,844

4,602

4,623

4,749

4,660

767,295

778,098

780,417

786,655

793,064

799,755

847,574

860,783

Securities (except CBE)

1,036,014

1,051,821

1,067,142

1,105,680

1,112,928

1,121,730

1,179,715

1,199,345

Currency in Circulation

331,684

326,756

323,893

324,569

326,179

325,132

331,977

342,842

Bank Loans (except CBE)

EGYPTIAN POUND EXCHANGE RATES Currency Australian Dollar Bahraini Dinar British Pound Canadian Dollar Chinese Yuan Euro Indian Rupee Japanese Yen (100) Jordanian Dinar Kuwaiti Dinar Lebanese Pound (100) Russian Rouble Saudi Riyal Turkish Lira UAE Dirham US Dollar

July 15 6.754 23.314 11.730 6.848 1.325 9.841 0.132 8.425 12.452 29.262 0.576 0.140 2.368 3.062 2.411 8.857

June 15, 2016 Amount change 6.528 3.46% 23.331 -0.07% 12.541 -6.47% 6.898 -0.72% 1.344 -1.42% 9.963 -1.23% 0.131 0.64% 8.356 0.83% 12.454 -0.01% 29.339 -0.26% 0.579 -0.52% 0.134 4.45% 2.361 0.29% 3.024 1.24% 2.411 0.00% 8.858 -0.01%

April 15, 2016 Amount change 6.799 -0.66% 23.3322 -0.08% 12.5358 -6.43% 6.896 -0.69% 1.366 -3.04% 9.977 -1.37% 0.133 -0.40% 8.103 3.97% 12.458 -0.05% 29.305 -0.15% 0.584 -1.37% 0.134 4.80% 2.361 0.30% 3.102 -1.31% 2.411 0.01% 8.857 0.00%

Feb.16, Amount 5.486 19.839 11.200 5.576 1.180 8.691 0.113 6.818 10.914 25.738 0.510 0.098 2.058 2.630 2.103 7.724

2016 change 23.10% 17.52% 4.73% 22.83% 12.27% 13.22% 16.91% 23.57% 14.09% 13.69% 12.94% 43.22% 15.06% 16.42% 14.65% 14.67%

July 15, 2015 Amount change 5.801 16.43% 20.568 13.35% 12.128 -3.28% 6.120 11.90% 1.274 3.97% 8.595 14.49% 0.123 7.48% 6.326 33.18% 10.976 13.45% 25.750 13.64% 0.508 13.39% 0.138 1.96% 2.081 13.78% 2.956 3.56% 2.125 13.45% 7.807 13.45%

Business Monthly â&#x20AC;&#x201C; August 2016

Market Watch

Key Indicators DEMOGRAPHICS 2007

2008

2009

2010

2011

2012

2013

2014

Total Population (millions)

77.5

79.1

83.5

84.5

88.0

90.2

92.2

94.7

Labor Force (millions)

23.9

24.7

25.4

26.2

25.8

27.0

27.6

28.4

Labor Force / Population (%)

32.5

32.8

33.1

33.4

33.0

32.7

31.3

8.9

8.7

9.4

12.0

12.7

13.2

Unemployment Rate (%)

SOURCE:

CENTRAL BANK OF EGYPT

BALANCE OF PAYMENTS (in millions of U.S. $) 2013/14

2015/16

2014/15

End of year

-33,702.7

-9,742.1

-10,430.3

-9,385.4

-9,227.6

-38,785.4

-9,985.9

-9,561.6

Trade Balance Exports

26,119.0

6,469.2

5,769.7

4,617.7

5,201.6

22,058.2

4,646.1

4,399.1

Imports

-59,821.7

-16,211.3

-16,200.0

-14,003.1

-14,429.2

-60,843.6

-14,632.0

-13,960.7

978.5

2,109.8

1,775.8

341.6

500.6

4,727.5

1,686.8

543.7

17,631.4

6,448.8

6,008.3

4,385.0

5,182.5

22,024.6

5,142.9

4,131.6

Services (net) Receipts Payments

16,652.9

4,339.0

4,232.5

4,043.4

4,682.2

17,297.1

3,456.1

3,587.9

Balance of Goods & Services

-32,724.2

-7,632.3

-8,654.5

-9,043.8

-8,727.3

-34,057.9

-8,299.1

-9,017.9

Transfers

30,367.9

6,188.6

5,797.2

4,963.1

4,926.8

21,875.7

4,318.8

3,992.7

Balance of Current Account

-2,356.3

-1,443.7

-2,857.3

-4,080.7

-3,800.5

-12,182.2

-3,980.0

-5,025.2

Capital & Financial Account

4,934.5

811.4

72.4

6,067.2

10,682.6

17,633.6

1,500.5

7,816.9

Foreign Direct Investment

4,119.3

1,773.2

960.0

2,947.9

689.9

6,371.0

1,385.5

1,718.5

Overall Balance

-1,478.6

410.0

-1,427.0

-29.1

4,771.0

3,724.9

3,656.7

-251.6

SOURCE:

CENTRAL BANK OF EGYPT

NON-PETROLEUM TRADE (in millions of U.S. $) Exports (Q2 2015-16) Total

Imports (Q2 2015-16)

Balance ( Q2 2015-16)

4,399.1

13,960.7

294.3

737.8

-443.5

1,469.8

4,299.6

-2,829.8

Other European countries

284.0

931.5

-647.5

Russian Federation & CIS

52.9

755.4

-702.5

1,349.9

2,825.2

-1,475.3

Asian countries (non Arab)

369.0

2,946.8

-2,577.8

African countries (non Arab)

135.8

214.9

-79.1

4.5

52.9

-48.4

438.9

1,196.6

-757.7

U.S.A. E.U.

Arab countries

Australia Other countries

-9,561.6

SOURCE:

INFLATION

The CPI (Consumer Price Index) and PPI (Producer Price Index) are based on the results of surveys of expenditure and consumption and relevant baskets of goods and weights. SOURCE:

CENTRAL BANK OF EGYPT

Business Monthly â&#x20AC;&#x201C; August 2016

GDP GROWTH

Gross Domestic Product (GDP) growth rates are based on 2001-02 prices.

SOURCE:

CENTRAL BANK OF EGYPT

TOURISM VISITS

Year 2013-14 2012-13 2011-12 2010-11 2009-10

Tourists 7.97 million 11.96 milion 10.95 millon 11.93 millon 13.7 millon SOURCE:

Change -34.7% 9.2% -8.2% -12.9% 11.4%

CENTRAL BANK OF EGYPT

Market Watch

Egypt-U.S. Trade EGYPTIAN EXPORTS TO THE U.S. (in millions of U.S. $)

EGYPTIAN IMPORTS FROM THE U.S. (in millions of U.S. $)

U.S.-EGYPT TRADE DEFICIT (in millions of U.S. $)

EGYPTIAN EXPORTS TO THE U.S. DURING MAY 2016

EGYPTIAN IMPORTS FROM THE U.S. DURING MAY 2016

SOURCE:

US INTERNATIONAL TRADE COMMISSION (USITC)

Business Monthly â&#x20AC;&#x201C; August 2016

Economy

STATE OF THE ECONOMY CBE reveals the extent of Egypt's economic problems to Parliament By Tamer Hafez

nclusive economic growth has been the mantra of President Abdel Fattah el Sisi and his successive governments since the president’s first day in office. It is, they have said, the only way to undo the failed economic policies of the past three decades, policies such as umbrella fuel subsidies that benefit the rich with their gas-guzzling cars far more than the poor who can only afford public transport. To achieve this “inclusive growth,” jobs have to be created, meaning legislative reforms are needed to lift up a business environment bogged down under decades-old laws. However, the government has been reluctant to rush reforms, fearing a third round of public unrest since 2011. Meanwhile, the Sisi administration has taken the lead with public sector investments in a bid to convince local and international private investors that Egypt is a safe and lucrative destination for their money. This strategy has cost the country dearly, with tens of billions of pounds spent on “national mega projects,” such as the New Suez Canal and cultivating 1.5 million acres in under 18 months, which were supposed to galvanize the economy. They haven’t. Even the Suez Canal Economic Zone, which essentially created a parallel government meant to bypass Cairo’s bureaucracy and corruption, has attracted only a handful of new foreign investments thus far, the Zone's chairman Ahmed Darwish admitted in late 2015. Amid this backdrop of massive spending, stalled reforms, paltry economic growth and anemic foreign exchange inflows, the Central Bank of Egypt in July delivered its firstever economic assessment of Egypt, covering 2011 to the end of third quarter, fiscal 2015/2016. Presented to Parliament’s Finance Committee, the “Report on Egypt’s Economic Status,”

Business Monthly – August 2016

paints a grim picture of Egypt’s economic future if the government and CBE itself don't come up with an effective plan to recover the government finances. The assessment relies on CBE’s own data, figures from the EGX Authority, and reports from international credit rating agencies Standard & Poor's and Fitch. Speaking to local media, economists and industry representatives called the report “catastrophic,” “most dangerous CBE report” and “shocking.” The report laid to rest rumors about how much aid money Egypt has received: over $29 billion from various Arab countries since 2011. Yet at the end of June 2016, reserves were little over $16 billion compared with $36 billion in 2010. Egypt has been spending on average $1 billion a month from its reserves on imports since 2011 through the end 2015. In September 2015, the national import bill, including both public and private sector spending, peaked at $1.76 billion. Egypt imports around 70 percent of its needs for individual consumption and manufacturing inputs. The July report said imports topped $80 billion by the end of fiscal 2014/2015, higher than the $60.8 billion initially estimated by CBE. The rising import costs came at the same time as a nine-consecutive-month drop in the Emirates NBD Purchasing Manager Index to 47.5 at the end of June 2016. The PMI tracks nationwide manufacturing activity, with scores below 50 indicating a contraction in manufacturing. This suggests that imports were mostly finished goods sold to consumers rather than manufacturing inputs. Indeed, Egypt’s declining PMI has occurred in parallel with a decline in exports, which fell from almost $27 billion in fiscal 2012/2013 to $22 billion in fiscal 2014/2015. The second quarter of fiscal 2015/2016 saw $4.4 billion in exports, down from almost $6 billion a year earlier.

Economy

According to the CBE report, this unchecked rise in imports and declining exports resulted in a national budget deficit of LE 280 billion ($36.6 billion at LE 7.64 to the dollar) by the end of fiscal 2014/2015 compared to LE 255.8 billion ($35.8 billion at LE 7.131 to the dollar) a year earlier. The deficit grew in the first nine months of fiscal 2015/2016 to $14.5 billion, compared to $8.3 billion for the same period a year earlier. Fueling this deficit is the dramatic drop in tourism, traditionally one of the top three sources of foreign exchange. After signs of a tentative recovery from the political upheavals in the past five years, the sector was hit hard by the October 2015 bombing of the Russian Metrojet flight shortly after it left Sharm el Sheikh and the subsequent flight bans imposed by Russia and the United Kingdom, two of Egypt’s largest markets for incoming tourists. Year on year, tourism revenues in the first nine months of fiscal 2015/2016 are down 54 percent and tourist stays are down 75 percent. Despite the Tourism Ministry’s shuttle diplomacy to get countries to lift their travel warnings against Egypt, the May 2016 crash of EgyptAir flight MS804 in the Mediterranean will hamper the sector’s recovery. Meanwhile, remittances, which were the number one source of foreign currency in 2015, decreased by 12 percent in the first three quarters of fiscal 2015/2016 compared to a year earlier. The report explained that this drop is not because Egyptian expats are sending less money home; rather, more expats are sending remittances via the black market to capitalize on higher rates. At press time, the official exchange rate was LE 8.89 to the dollar, while the parallel market rates ranged between LE 12 and LE 13 to the dollar. The report blamed local media for contributing to the dollar crisis by propagating rumors that encourage currency traders to hoard dollars to turn a profit. For the time being, the banking sector is keeping Egypt afloat by paying the bulk of the government debt to creditors. The CBE report said that 55 percent of the budget deficit is financed by commercial banks while it is financing 32 percent. The report warned that the government’s heavy reliance on the banking sector will result in a crowding out effect, noting, “Lower growth in deposit rates along with the current deficit levels will lead to a severe decrease in the growth rate of loans.” Less financing available for the private sector will depress the economy further. The report's biggest concern, however, is the rampant inflation caused by a mismanaged devaluation of the Egyptian pound against the dollar. CBE Governor Tarek Amer admitted to Bloomberg in July that defending the pound since 2011 was a “grave mistake.” This delay created a currency black market that is more than a third more expensive than the official rate. Despite incremental devaluations since early 2015, the CBE has failed to close the gap, and inflation has surged. The report calculated that inflation, minus edibles, during the first half of 2016 averaged monthly increases of 2 percent,

versus 1 percent monthly price hikes during the first half of 2015. In the same year-on-year comparison, inflation on edibles has almost doubled, with prices rising 12 percent in first half of 2016, compared to 6.24 percent a year earlier. Hardest hit are rice, up 47.5 percent compared to 4.5 percent; wheat, up 17.22 percent compared to 6.34 percent; vegetable oils, up 17.25 percent compared to 7.15 percent; and tea, up 27.42 percent compared to 1.64 percent in the first half of 2015. In June, inflation topped 14 percent. While keeping the official exchange rate mostly unchanged since March, the CBE has been trying to eliminate the black market by closing FX offices caught in selling dollars at rates higher than the official rate. According to CBE, 33 FX bureaus of the 115 registered have been shuttered. To avoid CBE inspectors, FX bureaus have started operating after official work hours, opening their doors after 9pm until after midnight. Meanwhile, demand for the few dollars remains high, keeping the parallel market price at a premium. As another solution, Egypt is looking at a dollar injection from the International Monetary fund. Currently, the IMF is ready to present Egypt with $12 billion over three years, but the CBE report notes that reforms such as the Value Added Tax, a more effective CBE policy and better ratings by international credit agencies will determine how far negotiations go. Taking on more dollar-denominated debt is another channel for boosting the domestic foreign currency supply. According to Finance Minister Amr el Garhy, $3 billion in treasury debt will be issued in the second half of 2016, bringing Egypt’s debt from such tools up to $10 billion. When these T-bills will be issued and how much they will be worth depends on the global economic performance, now that China's growth is cooling down. The last solution offered in the CBE assessment is enforcing even more stringent import requirements such as forcing importers to deposit 100 percent of a shipment’s value to get a letter of credit, compared to 50 percent before. This carries the risk of driving up black market prices even higher, however, as importers try to source dollars to cover the new requirements. While the CBE report praised its own policies in stimulating Egyptian businesses with foreign currency—for example, local steel factories have been able to access the funds to boost their operations from 15 to 20 percent of production capacity up to between 70 and 90 percent—it said that there is still $600 million pending repatriation, a major concern for potential foreign investors. There is only so much the Central Bank can do, however, and the report indirectly blamed the government for not having effective policies to manage imports. “The CBE has maintained the exchange rate for six months, which has depleted a huge portion of the bank’s resources from foreign currency. The plan was that such a move would be met with parallel procedures to limit importing so as to prevent future price spikes after CBE’s resource drain. Yet, this did not happen.”

Business Monthly – August 2016 I

TAKING A DIP IN THE HEAT

BY KATE DURHAM

hen you arrive in Gruyères, Switzerland, two trains and a tram ride from Geneva, you are greeted right away by a cheese dairy, a souvenir shop filled with cowrelated kitsch and a restaurant serving cheese fondue. Cheese, after all, is one of the things the Swiss are famous for— alongside chocolate and super-precise clocks. Perhaps it was nostalgia for that long-ago weekend in the mountains

Business Monthly – August 2016

northeast of Lake Geneva that sparked my recent craving for fondue. Or perhaps I was just tired of Egypt’s limited options for good cheese. Whatever—cravings don’t have to make sense; they just have to be satisfied. Which is how we ended up at Maadi’s Swiss Cottage, one of the few restaurants in Cairo focused on fondue and other traditional Swiss cuisine. Do call ahead. On my first attempt to reserve at dinner time, the hostess helpfully volunteered that fondue—the specialty of the house—wasn’t available that day. She recommended that I call back in a day

or two. Extra points for professionalism and saving us a wasted trip. And to be fair, Swiss Cottage does import their cheeses, so it’s a good idea to confirm if, like me, you suddenly find yourself with hankering for fondue. The other reason to reserve is because it’s a tiny place. There are five four-person tables in total, each dressed with a cover featuring a white cross on a red background, the motif of the Swiss flag. The dining room was also well adorned in Swiss-themed paraphernalia, with framed prints of rustic scenes and posters

SOHA EL GABI

Dining Out

promoting Alpine destinations—making the experience of consuming this rich winter dish on a 40-degree Cairo summer day all the more surreal. The front door is covered in cowhide, cowbells hang from the rafters, and ceramic figurines of the iconic black-and white bovines lounge about the room. Even the spice shakers are cow shaped: white for the cheese spices, red for the meat. Dark wooden wall panels with vine-shaped cut-outs complete the ambience—only the occasional alabaster vase and fanoos remind you that you’re still in the Middle East. Interestingly, fondue originated in France and Italy as well as Switzerland, but in the 1930s, the Swiss Cheese Union successfully promoted it as a Swiss national dish. Since the 1960s, when fondue parties became all the rave in the United States, “fondue” has referred to any dish in which something is dipped into a communal pot of something else. My companion was new to fondue, so we ordered a fourcourse meal of the traditional dishes: beef grisons (air dried beef, LE 50), cottage potato salad (LE 40), the house cheese fondue (LE 210), a half order of raclette (LE 130), a mixed table grill (LE 115) and chocolate fondue (LE 105). The salad, featuring chunks of boiled potatoes combined with shredded lettuce, cucumbers and carrots, was notable for its mild vinaigrette mixed with coarse mustard—a traditional Swiss dressing. The slices of air-dried beef were tender but otherwise ordinary. Appetizers cleared away, the cheese fondue arrived next. The basic fondue melts together Gruyère and Emmental cheeses, both hard and mildly acidic, into a creamy dip with a subtle nutty taste and a hint of sharpness. Fondue, which is traditionally prepared with wine, is served with or without alcohol at Swiss Cottage, per your preference. The restaurant’s other fondue variations add tomatoes or mushrooms, while the house special Cottage Cheese Fondue (“cottage” refers to the restaurant, not the cheese) is simply the basic fondue served with vegetables and fried potatoes for dipping in addition to the standard bread cubes. The assortment included zucchini, carrots, green beans, mushroom caps and green apples. The hot

SOHA E LGABI

Dining Out

cheese went particularly well with the cold zucchini, the tart apple and especially the earthy mushrooms. The do-it-yourself approach continued into the next course, heralded by the arrival of a two-tiered grill the size of a toaster. The metal top is for cooking the mixed-grill selections: thin slices of beef and chicken, halved beef and chicken hot dogs, and sautéed carrots, zucchini and mushrooms. The bottom level is for the raclette, which is the name of the dish as well as the type of cheese; it comes from the French verb racler, “to scrape.” In the Swiss Alps, the semi-hard raclette would be in a wedge or a wheel, slowly heating over an open fire, and as it melted, we’d scrape the gooey cheese directly onto our plates. Sadly, we were not in the Alps. We received a plate of sliced cold raclette, a palm-sized tray and a miniature spatula. Apparently, the idea is to melt the cheese in the tray and scrape it on to the plate. I experimented with DIY potato skins: cut a slab of cooked potato, place it in the tray, top it with some tomato and onion and a bit of pineapple, cover it with a slice of raclette and place it under the heating coil. Compared to the Emmental and Gruyère, I found the raclette mild, adding more warmth and creamy texture than taste to the other foods. For dessert, we opted for the dark chocolate fondue, which was about 60percent cocoa—a nice balance of sweet

and bitter. There are also milk and white chocolate fondues for those wanting something sweeter, as well as Movenpick ice cream. To dip, we were provided with a considerable selection of grapes, apples, peaches, cantaloupe, bananas, pineapple, nougat pieces, marshmallows and bits of yellow cake. Seeing that we still had chocolate left when our dippers were gone, the waitress—who was single-handedly tending to the entire dining room with efficiency and manning the phone—offered to bring us extra fruit and sweets, but we were done. Fondue and raclette are most definitely not an eat-and-run meal, and nearly two and half hours flew by while we were skewering, dipping, grilling, scraping and chatting. As we finished dessert, the chirping of a cuckoo clock near our table caught our attention and we watched the little bird with amused smiles. Then we looked at each other, checked our watches and looked back at the clock: The cuckoo was 25 minutes slow.

Swiss Cottage 21 Road 254, Degla, Maadi 2519-7655 or 011-1150-2179 Open 2 p.m. to 1 a.m. daily, closed Mondays

Business Monthly – August 2016 I

BY EDMUND BOWER

ost days, 57-year-old Hassan Salah wears a suit and tie to his job as a doctor for the World Health Organization, where he oversees improvements to Egypt’s public health system. But on weekends, Salah can be found in blue jeans, heavy boots and a sleeveless leather vest covered with Harley-Davidson patches. On a recent Friday afternoon, the bespectacled Harvard graduate is decked out in full biker gear—for a trip to the HarleyDavidson showroom in Sheikh Zayed for some minor repairs on his Touring Ultra Limited. Salah likes nothing more than to link up with a few like-minded friends and take a long ride down the highway to Ain Sokhna. Salah discovered motorcycles when he was living in the United States. Since he bought his Harley in 2011, the Cairo Resident been part of a rapidly growing movement of Egyptian bikers. Long regarded as a cheap way to get around for the popular classes, motorcycles in the last few years have drawn a

Business Monthly – August 2016

more affluent crowd, one that can afford prestigious brands like Honda, Suzuki and Kawasaki, which start at around LE 35,000 for a second-hand bike. Harleys fetch considerably more. It’s a marked change from the days when motorcycles were regarded as dangerous and low class, and the Egyptian market was dominated almost exclusively by Chinese and Indian brands, such as Dayun and Bajaj, which sell for as low as LE 4,000 to LE 7,000 for a brand new bike. In the past five to 10 years, motorcycle shops, garages and biker cafes have cropped up in high-end Cairo neighborhoods like Zamalek, Heliopolis and the Fifth Settlement. Local enthusiasts say the number of biker groups in the capital has mushroomed in the last decade from fewer than five to around 35 currently. Groups like the Shadow Riders, the Road Hammers and the Arabian Knights are modelled loosely on American biker gangs, which in the mid-20th century developed into their own subculture. With their patches and long hair, groups

like the Hell’s Angels became famous for their outlaw lifestyle—thanks particularly to Hollywood—through the 1960s and ‘70s. Today, motorcycle clubs all over the world emulate their nonconformist spirit of freedom and community, emulating their insignias, membership structure and attire—but mostly just on weekends. Egypt’s biker population continues to grow. Egybikers.com, a website for local motorcycle enthusiasts, (“Ride safe, ride free”) reports that around 2,000 to 3,000 new bike owners register on their site annually. The appeal of riding a motorcycle is obvious to anyone who has ever sat in Cairo gridlock, and with traffic getting worse all the time, they are an ever more popular means of transportation. But the lure of biker culture—the romance of the open road with a dash of rebellion—is obviously about something more than having a convenient way to get around. “It’s the freedom of getting out of the city,” says Egybikers’ financial manager, Amr Rashidi, “It’s a way for people to escape everyday life.”

JONATHAN RASHAD

HIGHWAY TO HELIOPOLIS M

Business Monthly – August 2016

MAYSOUR SAFWAT MAYSOUR SAFWAT

Gamil Nasry, 36, got his first motorcycle, a 400cc Yamaha Virago, at the age of 18. After graduating from university, he worked for a year as a banker, selling personal loans, before deciding that a 9-to-5 office job wasn’t for him. “I would come to work in a suit and tie, and they always told me off for having engine oil on my hands,” he says. So he moved to Sharm el-Sheikh and worked for a few years leading tourists on motorcycle mountain trips through the Sinai. Upon returning to Cairo, he got a job as a Harley-Davidson salesman and found extra work on the side as an instructor. He eventually built up his reputation and clientele to the point where he could support himself as a freelance trainer. “Motorbiking used to be an almost shameful thing to do,” says Gamil. “But these days, it’s rich people who want bikes.” His students have included prominent businessmen such as steel tycoon Ahmed Ezz; most are over 35 and married with kids. As the profile of riders in Egypt has changed, so too has the culture. “Fifteen years ago, no one wore leather or helmets,” he says. Balding bikers may still have a chance to live fast, but they’ve missed the boat on dying young. The government’s official test for a motorcycle license—a written exam and a quick whip around a parking lot—isn’t enough for the new safety-conscious riders. The United Bikers of Egypt, formed in 2012, requires registered groups to abide by safety guidelines. When he began teaching, Gamil says he struggled to find enough students to fill five two-hour slots a week. These days he averages 30, teaching courses to first-time bikers on basic road safety, maneuvering and maintenance. Often, his trainees go on to join groups. “You have to take a trip with them first and then they decide if they want you,” explains Gamil. The groups are less male-dominated than one might expect. Most allow members of both genders, while Egypt Female Riders is all women. Egybikers reports that 10 percent of its registered members are female; Gamil estimates that 40 percent of his current students are women. Groups organize rides weekly or monthly, from destinations ranging from Sharm el-Sheikh to “Zamalek for breakfast,” says Gamil. Most sponsor a monthly full-moon ride. They tend to be metic-

ulously organized, with a route leader, a captain, a navigator and a sweeper, and on longer journeys, they’re accompanied by a vehicle carrying spare parts and repair equipment. Rides can include a handful of bikers or hundreds. An annual ride sponsored by The United Bikers of Egypt is held on the first Friday in April. Last year’s spring ride to Ain Sokhna included some 4,000 riders. Two years ago, Mahmoud Mazen, a motorcycle enthuiast who owns an adventure travel company, organized the Biker Zone Expo and Show, a three-day annual event of stunts, bikes and accessories as well as workshops and live music. According to Mazen, the May event drew around 24,000 visitors this year, about 9,000 more than the year before—to the satisfaction of corporate sponsors like Red Bull and Ducati, the Italian motorcycle manufacturer.

This is not a cheap hobby. A used Harley—the classic choice for fans of biker culture—can set you back LE 200,000, not including safety gear, apparel and accessories. Apart from the obvious appeal of cruising down the open road among middle-age, middleclass men who otherwise might spend their Fridays being dragged around a shopping mall with the kids, this may be another reason why Egypt’s new biker enthusiasts tend not to be spring chickens. Youssef Kamel, a 24-year-old junior accountant at Harley-Davidson Egypt, admits that his 250cc Chinese import is leagues below the pricey vehicles on display in the Zamalek showroom where he works. Even if he could afford a Harley, however, Kamel is too busy doing other things with his weekends. “There are more important things in life,” he says.

Chamber news BOARD OF GOVERNORS

PRESIDENT Anis A. Aclimandos, Transcentury Associates

EXECUTIVE VICE PRESIDENTS Curt Ferguson, Coca-Cola Egypt – Atlantic Industries Ahmed Abou Ali, Hassouna and Abou Ali Law Offices VICE PRESIDENT, MEMBERSHIP Amr Allam, Misr Sons Development – Hassan Allam Sons VICE PRESIDENT, PROGRAMS Tarek Tawfik, International Company for Agricultural Production & Processing VICE PRESIDENT, LEGAL AFFAIRS Said Hanafi, Orascom Hotels & Development

MEMBERS OF THE BOARD Aladdin El-Afifi, ASEC Company for Mining (ASCOM) Hashem El Dandarawy, Team 4 Security Nevine Loutfy, Abu Dhabi Islamic Bank Egypt Omar Mohanna, Suez Cement Group of Companies David Chi, Apache Egypt Companies

COMMITTEE LEADERS

PAST PRESIDENT M. Gamal Moharam, MGM Financial & Banking Consultants ADVISOR TO THE BOARD Hisham A. Fahmy CHIEF EXECUTIVE OFFICER Tamer El Naggar

TREASURER Sherif El Kilany, Allied for Accounting and Auditing- Ernst & Young

AMCHAM COMMITTEES AND THEIR CHAIRS FOR AUGUST 2016 TO JUNE 2017 HAVE YET TO BE ANNOUNCED

American Chamber of Commerce in Egypt – Tel: (20-2) 3338-1050 – Fax: (20-2) 3338-1060 For more information about AmCham services and news, please visit www.amcham.org.eg or our US mirror site www.amcham-egypt.org

New Members Insurance

Agriculture Dehydro Foods Co. SAE. –Olam Egypt

Smart Medical Insurance

Address: 30-32, Extension of 6th Industrial Area, 6th of October City Tel.: (20-2) 3824-3352 Fax: (20-2) 3824-3348 Website: www.olamnet.com

Address: 40 Mosadaq Street, Dokki. Tel.: (20-2) 3762-0950 Fax: (20-2) 3748-5384

Bhuwan Saurav Managing Director - Dehydro Foods; Vice president - Olam

Amr El-Tayeb CEO

Membership Type Associate Resident

Consultancy

Membership Type Associate Resident

Investment

Ngage Consulting

Arden Consultancy

Address: Nile City Tower, North Tower, 22nd Floor, Cornich El Nile, Ramlet Boulak Tel.: (20-2) 2461-8583/ 2737-0876 Membership Type Website: www.ngage-consulting.com

Address: 8 Aflaton Street, Al Orouba, Office 502, Heliopolis Tel.: (20-2) 2290-3030 Fax: (20-2) 2290-4040

CHF Management and Consulting Services Egypt S.A.E – OPIC Loan Guarantee Facility

Sharkawy & Sarhan Law Firm

Address: Nile City Towers, Floor 22, North Tower, Cornich El Nil, Ramlet Boulak Membership Type General Tel.: (20-2) 2461-8661

Address: 2 Metwaly El Shaarawy Street, Sheraton Heliopolis. Tel.: (20-2) 2269-0881 Fax: (20-2) 2269-0882 Membership Type Website: www.sharkawylaw.com

Karim Refaat CEO

Sylvia Schoonderbeek General Manager

Associate Resident

Membership Type Associate Resident

Legal Services Karimeldin Mohamed Sarhan Partner

John Yancura Chief of Party

Associate Resident

Food & Beverages

Mining

Gourmet Investment Group

Aton Mining Inc. (Formally Alexander Nubia Inc)

Amgad Sultan Executive Director

Mark W. Campbell President and CEO

Address: 3 Taha Hussein Street, Zamalek Tel.: (20-2) 2737-0617/ 2737-0619 Fax: (20-2) 2737-0616 Membership Type Website: www.gourmet.com

Associate Resident

Ahmed El Fendi President

MENA OFFET LLC

Address: 6 Merfak El Miah Street, Amireya Tel.: (20-2) 2426-1656/7/8 Fax: (20-2) 2426-1661 Website: www.sima-group.com

Address: 7607 Eastmark, Suite 250 A, College Station TX 77840, Texas, USA Tel.: (00-1) 832-525-7888

Business Monthly – August 2016

Membership Type Associate Resident

Petroleum

Sima Food Industries

Address: 14 Shagaret El Dor Street, 7th Floor, Suite 33, Zamalek. Tel.: (20-2) 2735-6548 Fax: (20-2) 2735-6548 Website: www.atonresources.com

Osama F.G. Hanna General Manager

Membership Type Associate Resident

Membership Type Associate-NonResident

New Members Pharmaceuticals/Medical/Health

Real Estate

Siemens Healthcare S.A.E.

Egyptian Resorts Company (ERC)

Address: MB 4 Maher Abaza Street (Fomerly El Laselky Street), Maadi Technology Park, Maadi

Address: 4A Aziz Abaza Street, Zamalek. Tel.: (20-2) 2735-8427 Fax: (20-2) 2735-2743

Wael El-Hatow Chief Executive Officer

Mohamed El Wetidy Managing Director & Head of Egypt Siemens Healthcare

Tel.: (20-10) 0178-0027/ Short Number: 16610

Website: www.siemens.com.eg

Membership Type Associate Resident

Transportation

Ibnsina Pharma

Omar Abdel Gawad Managing Director

British Airways

Address: Industrial Zone 1, Obour City 91, Al Obour City. Tel.: (20-2) 4489-1102 Fax: (20-2) 4489-1137 Website: www.ibnsina-pharma.com

Address: International Residence Suites, City Stars Complex, Al Forsan Street, Heliopolis. Tel.: (20-2) 2480-0380 Membership Type Fax: (20-2) 2480-0366 Multinational Website: www.ba.com

Karim Beshara Acting Commercial Manager

Membership Type Associate Resident

Industry & Economics Consultants (IEC)

Ahmed Shanan Partner/Managing Director

Address: 23 Mohamed Youssef El Kady Street, Merghany, Heliopolis. Tel.: (20-2) 2419-8508/ 2419-2791 Membership Type Fax: (20-2) 2417-8119 Associate Resident Website: www.iecmed.com

Public & Governmental Organizations The Industrial Training Council

Mahmoud El Sherbiny Executive Director

Address: 2 Road 164, Hadayek El Maadi, behind the Supreme Constitutional Court, Maadi. Tel.: (20-2) 2529-5300 Membership Type Fax: (20-2) 2526-0310 Public & Diplomatic Website: www.itcegypt.eg

DGL International for Freight Forwarding & Logistics

Ihab El Azab Managing Director (CEO)

Address: 2S, Square 125 8 Z, Misr El Tameer Buildings, Masaken Sheraton, Heliopolis. Tel.: (20-2) 2267-6424/5/6 Fax: (20-2) 2267-6428

Membership Type Associate Resident

Changes Change in Company Name A15 Orange Egypt for Telecommunications Orange Data CR

For any change to contact information, please contact the Membership Services Department at the Chamber’s office Tel: (20-2) 3338-1050, ext. 0016 – Fax: (20-2) 3338-1060 E-mail: membership@amcham.org.eg

Business Monthly – August 2016 I

New Members New Replacements at Member Companies: Francis J. Ricciardone President, The American University in Cairo

Category: Affiliate Sector: Academic/ Educational/Research & Development (R&D)

Khaled El Salawy CEO & Managing Director, Piraeus Bank

Category: General Sector: Financial Sector

Category: Affiliate Sahar Fekri Sector: Financial Sector Division Head-Financial Institutions, Union National Bank- Egypt

Hisham Ramez Chairman & Managing Director, Arab International Bank

Category: General Sector: Financial Sector

Omar El- Masry Marketing Director, Danone Egypt Hossam Farag Human Resources Director, Danone Egypt

Category: Affiliate Sector: Food & Beverages Category: Affiliate Sector: Food & Beverages

Tariq Mohsin Razaq CEO- Infort, Mansour Manufacturing & Distribution Group of Companies

Category: Affiliate Sector: Food & Beverages

Rafic Khairallah Managing Director, Sofitel Legend Old Cataract Aswan Sofitel Luxor Winter Palace

Category: General Sector: Hospitality/ Tourism/Travel

Magued Osman Chairman, Telecom Egypt

Category: General Sector: Information Technology Category: Associate Resident Sector: Insurance

Bassam Moussa Head of Banking & Finance Department, Nour & Selim in Association with Al Tamimi & Co.

Category: Affiliate Sector: Legal Services

Atef Helmy Chairman, Orange Egypt for Telecommunications

Category: General Sector: Service Providers

Sherif Badrous Chairman and CEO, EGYPTAIR Airlines

Category: General Sector: Transportation

Affiliate Members Agriculture Arun Pinto

Chairman - Dehydro Foods Co. SAE Vice President - Olam Egypt

Raksha Nandan

General Manager-Finance, Dehydro Foods Co. SAE - Olam Egypt

Consultancy

Tarek Seif El Nasr

Business Development Officer - Ngage Consulting

Mohamed Bahaa

Managing Partner and CFO - Ngage Consulting

Food & Beverages Khaled Metwalli

Egypt and Jordan CFO, Pepsi-Cola Egypt

Amr Salman

Nada Ramadan

HR Business Partner and Senior Director Egypt & Jordan Commercial Unit, Pepsi-Cola Egypt

Jalal Abugazaleh

Managing Director - Gourmet Investment Group

Mohamed Abdelaziz

Finance Director Egypt & Levant, Mondelez Egypt Foods

Hospitality/Tourism/Travel Lydia Rafea

Moataz Darwish ER Manager â&#x20AC;&#x201C; GR Manager & Deputy Chairman, Shell Egypt

Category: Affiliate Sector: Petroleum

Bernd Wirth Production and Reservoirs Manager, Deputy GM, DEA Egypt Branches

Category: Affiliate Sector: Petroleum

Category: Public & Diplomatic Sector: Public & Governmental Organizations

Senior Director, Sales Pepsi-Cola Egypt

Saeed El Alfi Chairman of the Board, Delta Insurance Company

Emad Ghaly CEO, Siemens SAE (Siemens Technologies, SAE)

Mohamed Khodeir CEO, General Authority for Investment & Free Zones (GAFI)

Director of Sales & Marketing - Sofitel Legend Old Cataract Aswan - Sofitel Luxor Winter Palace

Information Technology Sherif Farouk Fouad

Manager, Business Development - Orange Data CR

Legal Services Ehab Taha

Category: Multinational Sector: Power

Business Monthly â&#x20AC;&#x201C; August 2016

Partner, Ibrachy & Partners

Transportation

Mohamed Ahmed Abdel Ghany

Vice President-Operation Manager - DGL International for Freight Forwarding & Logistic

Member News ARAB AFRICAN INTERNATIONAL BANK Global Banking & Finance Review has recognized the Arab African International Bank as the number one investment bank in Egypt for the third consecutive year. Created in 2011, the awards recognizes prominent companies of all sizes in the financial world. AAIB was one of 24 Egyptian banks and financial institutions to receive awards.

INTERCONTINENTAL HOTELS The InterContinental Hotels Group Egypt was named the country.s Leading Hotel Group for 2016 at the World Travel Awards Ceremony held at Diamonds La Gemma dell.Est in Zanzibar, Tanzania. The awards were established in 1993 to acknowledge, reward and celebrate excellence across all sectors of the tourism industry. Overall, there were 10 other hospitality establishments from Egypt nominated in various categories.

GENERAL ELECTRIC General Electric and EgyptAir signed a deal for maintenance, repair and overhaul consulting services for the CFM56-7B airplane engine. The agreement covers technical support and consulting for MRO operations, facility readiness, tooling optimization and other services. In other news, GE appointed Joseph J. Anis as President and Chief Executive Officer for its power services business for the Middle East and Africa. His predecessor, Azeez Mohammed, moved to become CEO for GE Energy Connection.s Power Conversion unit in Paris.

TAKATOF The Takatof Association for Development inaugurated upgrades to the Om El Moemenien School in the Shobra district of Cairo. The school consists of three buildings that can now accommodate some 640 students plus 43 teachers and administrators. The improvements were completed in seven months and cost LE 3.5 million. Takatof also upgraded the Om El Moemenin Clinic for Students, which is next door.

Business Monthly â&#x20AC;&#x201C; August 2016

Advertorial BMW

COCA-COLA

Bavaria Auto Group Egypt has introduced its entry-level 3-series, the 318i. The new model will be assembled locally alongside the X4, X6 and X5 SUV models at the firm’s 6 October City factory. The new model will feature BMW’s latest 1.5-liter engine with a turbo to produce 136 horsepower allowing the car to reach a top speed of 210km/h and accelerate to 100km/h in 8.9 seconds while averaging 5.4 liters of fuel per 100km. The 318i can be ordered with satellite navigation and an 8.8-inch infotainment screen.

The Coca-Cola Co. Egypt has launched Ice Coke for the summer season. With a bottle made of ice that’s filled with Coca-Cola, it’s perfect for the beach, once your ice-cold beverage is consumed, the packaging melts, leaving nothing to throw away or recycle. Coca-Cola Egypt released Ice Coca-Cola on the first day of the Eid Al-Fitr feast, making it the first country in the region to have the new product.

ACCORHOTELS

JUMEIRAH REAL ESTATE

Following the approval of shareholders at a meeting last July, AccorHotels Group officially announced the acquisition of FRHI Hotels & Resorts, adding Fairmont, Raffles and Swissôtel to their luxury hotel brands. The new additions instantly positions AccorHotels as a leading player in the global luxury hotel market, increasing its longterm growth potential for profitability as well as significantly expanding the company’s footprint in North America, the world’s largest and most influential consumer market.

Jumeirah Real Estate Investment and Sakan Developments unveiled their flagship joint venture, Jumeirah Bay-Ras Al Hekma, on the North Coast. Located at the heart of the Ras Al Hekma Bay area, the 6-million-square-meter project is a unique mixed-use development with an investment of LE 15 billion. The resort, which will be delivered in three phases, will consist of seven diverse residential areas offering a total of 980 units in phase one, which is scheduled to be finished at the end of 2019.

54 I

Business Monthly – August 2016

Advertorial EMIRATES

SAMSUNG

Emirates was named the World’s Best Airline 2016 at this year’s Skytrax World Airline Awards. It also won Best Airline in the Middle East and World’s Best Inflight Entertainment (the latter for the 12th year in a row.) This year’s Skytrax awards were based on surveys of an estimated 19.2 million patrons of 280 airlines by customers from 104 countries. The Skytrax survey measures 41 key performance indicators. In other news, Emirates has appointed Thani Abdulla Al Ansari as Egypt country manager, overseeing sales and service, cargo and airport operations.

Samsung has unveiled the all new Twin Cooling Plus refrigerator with a Smart Conversion feature that turns the freezer into a fridge, giving you additional space so you’ll never run out of room for food again. As for leftovers, the high humidity of up to 70 percent ensures that your foods stay fresher for longer.

EMIRATES NBD

Responding to rumors that surfaced last month, Sahar El Damati, deputy managing director and a member of the board at Emirates NBD Egypt, stressed that Emirate’s NBD credit and debit cards can still be used abroad. Though the bank does have limits using cards for overseas transactions, it plans to introduce foreign-currency cards soon.

General Motors Egypt has announced that it is part of an initiative launched by the Ministry of Trade and Industry called Made in Egypt with Pride that promotes high-quality locally made products. According to GM’s regional managing director, Tarek Atta, the company has invested LE 110 million over the years into building cars like the Aveo, the N300 SUV and, more recently, the newlydesigned Optra. The GE factory in Egypt uses 45 percent locally made components for passenger cars and 60 percent Egyptian parts for commercial cars.

Business Monthly – August 2016 I

Announcements Jobs AMCHAM RECRUITMENT CENTER Code

Vacancies

Company Name

102719 102641 102626 102393 102545 102495

Fleet Manager Service Manager IT Manager Collection Section Head ICT Platform Project Manager Sales Manager

Paradise Capital Holding for Financial Investments S.A.E GBAuto - Ghabbour Abraj Misr Advanced Computer Technology - ACT SEED Project Al Madina for Advanced Technology

For more information about these jobs and others, visit: www.amcham.org.eg/recruitment – e-mail: recruitment@amcham.org.eg, Tel: (20-2) 333 88 220 Ext. 1513 - 1514 Fax: (20-2) 333 73 779

Top Tenders

TOP TENDERS

FROM

TAS

Client

Description

Deadline

Bid bond Specs fees

Sectors

Request of international offers to supply (a) two ETD (explosives trace detection) Egypt Air Holding Co., Purchases & Stores Dept.,, devices, (b) four WTMD) metal objects detection gates & (c) 10 (HHMD) hand held The Cashier metal objects detection devices.

August 14, 2016

30,000 LE LE 1,500

Industry Transport

Request of best offers & proposals in a public auction for granting the right to exploit Egyptian Airports Co. - New commercial space for advertisements at Alexandria International Airport. Leasing fee is subject to 10 % annual increase. Ref. / 2016/ 2017.

August 15, 2016

14,000 LE LE 1,000

Management & Operation Airports & Ports

Beneficiary Sectors

Generating Sectors

www.amcham.org.eg/TAS

For further information, contact the Business Information Center at AmCham Egypt Tel: (20-2) 3338-1050 – Direct: (20-2) 3761-9641 • Fax: (20-2) 3338-9896 • E-mail: info@amcham.org.eg Website: www.amcham.org.eg • US Website: www.amcham-egypt.org

U.S. Exhibitions

Listings are now available on our website:www.amcham.org.eg Exhibitions related to the following sectors are scheduled for the upcoming months. Sector

Show Name

Website

Embassy Contact Person

TEL. 2797-2688

August Retail

Outdoor Retailer Summer Market

www.outdoorretailer.com

Cherine Maher

Wood Products

International Woodworking Fair

www.iwfatlanta.com

Tarek Khodary

Agribusiness

Farm Progress Show

www.farmprogressshow.com

Cherine Maher

2797-2688

September Energy

Solar Power International

www.solarpowerinternational.com

Mai Abdelhalim

2797-2146

Safety and Security

ASIS

www.asisonline.org/

Cherine Maher

2797-2688

Environment-Water

WEFTEC 2016

www.weftec.org

Hany Wassef

2797-3422

Minning

MINExpo International 2016

www.minexpo.com

Mai Abdelhalim

2797-2146

Food / Agribusiness

Americas Food & Beverage

www.americasfoodandbeverage.com

Ibrahim Al-Habbal

2797-2388

For more information about these exhibitions, please contact: The Commercial Service at the U.S. Embassy Tel: (20-2) 2797-2330/ 40 - E-mail: office.cairo@trade.gov *Please refer to the Commercial Service at the U.S. Embassy for any updates on the exhibitions.

Business Monthly – August 2016

Classifieds Benefits ABOU GHALY MOTORS

AMERICANA

Abou Ghaly Motors Group (AGM) is pleased to offer exclusive benefits to AmCham members on various products as follows: - Accessories Voucher with the amount of 2,000 EGP, for purchasing- Subaru -JeepChrysler- Dodge- Ram- KTM. - 10% discount on “Sixt” rent car. - 20% discount on “London Cab” on the second leg to and from the Airport. - Different financial programs from Abou Ghaly Group for all products with a minimum down payment of 25%. - Protection plan including the insurance with a very special rate of 3.5%.

Is pleased to extend its exclusive 15% discount to all AmCham members throughout 2016 at the following restaurants in Egypt:

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card***

* The offer does not apply for delivery orders.

For more information, please contact: Amr Mo'men Phone Number: (20-2) 2413-4577/ 46300-000 Call Center: 19570 • Mobile: (20-12) 7520-7317 For London Cab reservation: 19670

- Tikka Restaurants - Fish Market - TGI Fridays - Grand Café - Fusion - Maestro Pastry Shop (Heliopolis & Mohandsseen)

***Di sc ou nts wil l be gra nted for AmCham members upon presenting th ei r AmCh am 2016 membersh ip card***

Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits

This offer is valid until December 31, 2016

CAIRO MARRIOTT HOTEL Is pleased to extend its offer of 15% discount on Food and Beverages at all Cairo Marriott outlets (This offer does not require having a room at the hotel) In addition to a special accommodation rate of: • $115 per single room per night • $130 per double room per night • 25% discount on laundry during your stay - Rate is for Bed and Buffet Breakfast at Omar’s Cafe, subject to availability and prior reservation, valid at any day of the week. - Members can only accompany their spouse and children during their stay.

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Mai Moenes Telephone: (20-2) 2739-4647 Ext. 8808 Email: mai.moenes@marriotthotels.com

CONRAD CAIRO HOTEL Is pleased to extend its offer of 15% discount on Food & Beverages in the below restaurants: - Oak Grill - Kamala Asian restaurant * Discount is not applicable on public holidays, special occasions, Christmas and New Year’s Eve * Discount is not applicable on alcoholic beverages

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Marwa Hanafy Telephone: (20-2) 2580-8888 Fax: (20-2) 2580-8181 Email: marwa.hanafy@conradhotels.com

Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits

This offer is valid until December 29, 2016

The BUSINESS MONTHLY Classifieds section is open exclusively to AmCham member companies. Text ads are £E 150 for up to 30 words, £E 5 per additional word. Abbreviations, phone numbers and e-mail addresses count as one word. Display ads are £E 100 per cm in height, per column (max. 20cm in combined total height). Discounts are offered for regular advertisers and repeat bookings. Insertion orders, payment and ad content must be received by the 15th of the month preceding publication. All classified ads subject to editorial approval. For more information, or to place a classified ad, contact Amany Kassem at (20-2) 3338-9890, fax (20-2) 3338-0850, e-mail: akassem@amcham.org.eg

Business Monthly – August 2016 I

Current Benefits

Only With Your AmCham Membership 2016 Card

Academic/ Educational/ (R&D)

The Institute of Management Accountants (IMA) 30% discount to AmCham Members on IMA Membership. As a member of the IMA - Peer Networking. December 31, 2016

Accounting

BDO Khaled & Co. 15% discount for two main outsourcing services: Human Resources Outsourcing, finance & Accounting Outsourcing

Automotive

December 31, 2016

Bavarian Auto Group (BAG) 1- 2% discount on BMW line sticker prices. 2- Original car carpet & Key chain as a gift on your car. 3- BMW insurance with different packages, services and special rates: - Rate 4,25% including taxes, stamps and issuing fees - Road assistance 24/7

December 30, 2016 SMG Engineering Automotive Co. Up to 20% Discount on Spare Parts & Labor for KIA, SEAT, Mercedes and SsangYong Car Owners * HR letter is required from the member company for the employees who do not hold a membership card December 31, 2016

Banks

Abu Dhabi Islamic Bank - Egypt Abu Dhabi Islamic Bank - Egypt, is Assigning A@W (ADIB at Work), a dedicated account manager to handle all requests received from members as well as a special web link to share the offer with all members. Members will receive a special rate on admin fees from 1.5% to 1% for all types of loans. Members applying for ADIB cash back cards, will benefit from waiving the annual fees for the first year, in addition to the below privileges: - Members will be offered current accounts - Gold customers (over 500,000 EGP) - Cash Back Cards December 31, 2016 Barclays Bank Egypt, SAE Barclays Premier Banking offers you world-class products at preferential interest rates, dedicated team to meet your needs, Exclusive Concierge Services, a wide range of retailers and service providers with distinct Rewards & Benefits, bringing along Peace of Mind to your banking experience and many criterias. For more information about the offer, please browse the below link. http://www.barclays.com.eg/premier/overview/index.html December 31, 2016

Courier Services

Aramex International Egypt Free Shop & Ship Membership & a 30% Discount on all Personal Domestic Services.

December 31, 2016

DHL Express 30% discount on DHL published rates for outbound international shipping services.

December 31, 2016 FedEx Egypt Save up to 45% discount off the full cash rate on FedEx Inbound & Outbound international shipping, and a 40% discount off the full cash rate on FedEx domestic shipping. December 31, 2016

Health

Dar Al Fouad Hospital Offering EXCLUSIVE prices on Complete Physical Check Up Program using AmCham 2016 membership card. â&#x20AC;˘ All discounts apply for the member, spouse and children ONLY December 31, 2016

Information Technology

National Trading Company (Appliance) Up to 10% discount on Laptops, Mobile and their accessories at Appliance retail branches "Mall of Arabia, City Stars, Cairo Festival City Mall, City Center Alexandria, City Light Alexandria and El Gouna branch" - 20% discount on Digital Signage solution. - 10% discount on GPS services. - 10% discount on security systems. December 31, 2016

Publishing

The Middle East Readers Information Center (MERIC) 25% Discount on The Middle East Observer Annual Subscription Rate

December 31, 2016 PressReader 20% discount on PressReader Solutions for businesses Members enjoy a special 20% discount on PressReader Solutions for businesses December 31, 2016

Optical

Magrabi Group 15% discount on medical frames, sunglasses and lenses available at all Magrabi Optical stores in Egypt. December 31, 2016

Business Monthly â&#x20AC;&#x201C; August 2016

Hotels & Restaurants

Insurance

Cairo Marriott Hotel 15% discount on Food and Beverages at all Cairo Marriott outlets (This offer does not require having a room at the hotel) • $115 per single room per night (B&B at Omar’s Cafe) • $130 per double room per night (B&B at Omar’s Cafe) • 25% discount on laundry during your stay December 31, 2016 Dusit Thani Lakeview Cairo Hotel 20% discount to AmCham members on Food & Beverages in all restaurants, Branzino (International), Garden Grill (Oriental), Lobby lounge & terrace, Izumi (Sushi Bar), Ruen Thai, Dusit Gourmet and Blue Rose (Bar); excluding alcoholic beverages, service charge and taxes. The offer is not applicable during special promotions and public holidays. July 9, 2017 Fairmont Nile City Hotel 10% discount on food & beverages at Saigon Restaurant & Lounge, Napa Grill, Bab El Nil, Onyx Lounge, and Sky Pool (Excluding Alcoholic beverages).- Willow Stream Spa Gym Annual Membership L.E. 9,500 instead of L.E. 15,000 (Including a trainer for ten private sessions). December 30, 2016 Four Seasons Hotels and Resorts, Egypt 15% discount in all restaurants (food and non-alcoholic beverages only) as well as spas at all Four Seasons Hotels in Egypt. December 31, 2016 Marriott Hurghada 15% discount on total bill, including alcoholic beverages, in addition to the below privileges. - Welcome Drink upon arrival. - Free entrance to the health club and Gym excluding Massage. - Free wireless internet in all public areas. - Early check-in & late check-out subject to hotel availability. - Upgrade to next room category subject to hotel availability December 30, 2016 The Nile Ritz-Carlton, Cairo 30% Discount on Food and Beverages, 50% Discount on City Resort Membership and 30% Discount on Spa Treatments December 31, 2016 Royal Maxim Palace Kempinski Hotel 15% on Deluxe rooms, with VIP amenities in room/suite during the stay, via brand.com website only, on published rate on Brand.com website only- Family Plan: Clients of two adults and 1 or 2 children from 5.99 to 11.99 will be charged as one double and one single room. 15% on the below selected restaurants: - Discount in Romanov - Discount in Lucca, Yana and Bab El Qasr - Discounts applied on Food and non-alcoholic beverages. * The above discount is on the selected restaurants - 15% discount on Resense SPA treatments December 31, 2016 Safir International Hotel Management Egypt 20% discount to AmCham members on accommodation published rates, and also applied on food & beverages in all restaurants December 31, 2016 Semiramis InterContinental Hotel 20% discount on the below restaurants during weekdays. Sabaya, Pane Vino, the Grill, In addition to: *City view room: L.E 990 *Double city view room: L.E 1,140 *Nile view Supplement: L.E 150 * The offer is not applicable during public holidays & special events. Above rates are including breakfast & inclusive of 24.32 % service charge & taxes. December 29, 2016 Arab Misr Insurance Group | gig 25% Discount on Travel Care Insurance Rates Arab Misr Insurance Group | gig, has the pleasure to provide AmCham members a 25% discount on Travel Care Insurance Rates. December 31, 2016

AmCham Egypt members can now enjoy the benefits offered by AmCham Lebanon, AmCham Morocco, AmCham Tunisia and AmCham Abu Dhabi as AmCham MENA Council members. For details, please visit http://www.amchammena.org/index.asp?p=1 If you have any inquiry regarding any of these benefits, please contact Ms. Azza Sherif, Membership Department, AmCham Egypt. Mobile: 010 996 96125 Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for all of the above AmCham benefits

Business Monthly – August 2016 I

Media Lite

A Glance At The Press No.... I don’t want to float. I don’t know how to float

Al Masry Al Youm, 19

Media Lite is a satirical review of items published in the local and international press. All opinions and allegations made in them belong solely to the original publications and no attempt has been made to ascertain their veracity.

IN SHAPE

Egypt is famous for its ancient pyramids and its cotton. Now the country is poised to become known the world over for—drumroll please—its shape. Egypt was recently declared the most rectangular country in the world by an Australian statistician. David Barry explained on his blog that he was inspired to rate all the nations in the world according to their rectangularness after a Facebook friend noted that Turkey was “a remarkably rectangular country.” In fact, it’s only in 15th place, according to Barry, who devised a “simple algorithm to solve the burning question of which countries were closest to “optimum rectangles,” meaning those with the “maximum percentage overlap with a rectangle of the same area.” Rectangular competitors in the top 10 included Lesotho (fourth) and Poland (ninth). Who says Egypt doesn’t rank number one in anything? CairoScene, July 21

Business Monthly – August 2016

ROCK STAR

People strolling along Alexandria’s seaside Corniche one afternoon last month heard distressed barking and discovered a small dog trapped under the rocks. Failing to free the poor pooch from beneath the heavy stones, the good samaritans returned the next day to try again. Day after day, the crowd of would-be animal rescuers grew, passing food and water to the imperiled canine, while a veterinarian was called in on standby to administer onsite emergency medical treatment once the dog was freed. Finally, a local construction company volunteered to send in a crane to lift the heavy stones and rescue him. “Rock” and his new owner will presumably live happily ever after. Daily News Egypt, July 27

COMMERCIALLY CORRECT

What do cows, motorcycles and talking babies have in common? All were

featured in adverts that were recently banned by Egypt’s Consumer Protection Agency for violating “public morality” and “Egyptian traditions.” In June, the CPA suspended four different television commercials promoting dairy products, cotton underwear and non-alcoholic beer. A seemingly innocent Juhayna ad featuring a group of cute toddlers conversing in their high chairs had a voice-over with “sexual innuendos,” according to a statement by the agency, while an ad for Dice underwear allegedly promoted “marital infidelity” by portraying a wife who says she’ll tolerate anything from her husband except buying another brand of undies. Then last month, a Labanita milk ad got pulled for portraying two pharmacists as cows who can’t find the right medication for their customer. The spot was apparently deemed “offensive to pharmacists.” . Various media, July 14

Get a gold coin for every certificate of deposit or time deposit Barclays Bank Egypt is awarding all its existing and new customers gold coins with every certificate of deposit and time deposit for Egyptian pounds and US dollars.

Call 16222 Aspire for more. Prosper.

Terms and conditions apply. Barclays Bank Egypt S.A.E.