THE NUMBER of unemployed people in Egypt is increasing, with the unemployment rate rising to a near two-year high in the second quarter of 2020 to reach 9.6 per cent, 2.1 per cent higher than its level in the same period last year, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).
“The increase is due to the repercussions of the Covid-19 pandemic and the government’s taking precautionary measures including the partial closure of shops as well as the night time curfew,” it noted. The first quarter of 2020 saw private firms and factories laying off workers under the pressure of the pandemic, which slowed economic activities and obliged a partial lockdown.
CAPMAS attributed the decline in the labour force during the first quarter from 28.1 million to 26.7 million to people’s reluctance to work during the pandemic and their difficulty in finding jobs. While the unemployment rate was 8.5 among males, the figure was almost double that at 16 per cent among females during the first quarter of the year.
THE WEIGHT of the subsidised bread loaves produced by the government will be reduced by 20g on 18 August, according to a Ministry of Supply document seen by Reuters.
The move will allow bakers to make more fixed-price loaves from a standard 100kg bag of flour, with the new weight being 90g and each sack yielding 1,450 loaves. More than 60 million Egyptians have access to subsidised bread through the ration-card system, which gives each member of the family five subsidised loaves per day.
“Due to demands received by the Ministry of Supply from bakers across the country, we agreed to recalculate the cost of each sack of flour [to account for] increases in gas and diesel fuel prices and to add insurance costs for bakery workers to be borne by the ministry,” Ahmed Kamal, the Supply Ministry spokesman, told Reuters.
More companies sold short
IN A MOVE aimed at energising Egypt’s stagnant stock market, the Egyptian Stock Exchange has increased the number of listed companies eligible for short-selling transactions to 46. The move includes 16 new companies from different sectors like tourism in the Amer Group and the Egyptian Company for Tourism Resorts, the oil services company Maridive, and some industrial heavyweights like Arabian Cement and Egyptian Iron and Steel.
Short-selling allows investors to borrow against buying overvalued stock, sell the stock, and then buy it back when its price drops, allowing them to return the original loan to the lender while pocketing the profit made from the difference in price. If things do not go as planned and the price increases, the investors will find themselves having to shoulder any losses.
Short-selling was introduced for the first time to the local market in December, but it was limited to only 30 large listed companies accounting for 0.005 per cent of the Exchange’s total free-floating shares. Under the changes, companies with a smaller market cap of 0.001 per cent will be eligible for short-selling.
Observers believe that investors missed opportunities during the Covid-19 induced market slump of the last few months, and the markets are now beginning to recoup losses and are likely to continue on an upwards trajectory. The market’s main EGX30 index has lost 20 per cent of its value since the beginning of the year. Overall short-selling transactions in the first four months of 2020 did not exceed LE100,000.
Banque du Caire IPO postponed
THE LONG-AWAITED initial public offering (IPO) of 20 to 30 per cent of the state-owned bank Banque du Caire will not now take place before next year as the Covid-19 pandemic has affected demand.
The plan to divest a stake in the bank was first revealed in 2018, but it has been postponed several times due to the emerging markets crisis and then the countdown to the Saudi oil giant Aramco IPO which withdrew a lot of liquidity from funds in the region.
The IPO is supposed to yield around $500 million, and in 2018 the government nominated other public companies to go private, including oil giant Enppi. The plan also included stakes in already listed companies like Alexandria Minerals and Oils and Sidi Kir Petrochemicals.
The Banque du Caire IPO would have been the largest since Telecom Egypt in 2006.
City Gate deal frozen
ORASCOM Investment Holding (OIH) has failed to land a deal with Qatari real-estate developer Diar to buy the latter’s City Gate project after the two parties were not able to get the approvals needed to go on with the deal within the agreed time frame.
OIH has been operating as a holding company with investments mainly in the telecoms, media and technology, and cable businesses since its establishment in 2011. It recently adopted plans to diversify its portfolio from a solely technology-based firm to an investment company operating in different sectors.
The company is the outcome of a split of assets between Orascom Telecom Holding, founded by business tycoon Naguib Sawiris, and VEON (formerly Vimpelcom). In May, Sawiris, who chairs OIH’s board, agreed in principle with Diar to acquire a 60 per cent stake in the City Gate project for LE658 million, with the deal pending the approval of the New Urban Communities Authority (NUCA) for a deadline extension beyond 2021 after the project’s being paused since 2016.
The deal would have seen Diar paying a LE1.25 billion fine to the NUCA for the delay in completing the project. Diar acquired the land 12 years ago, but failed to deliver on construction targets. It claims that the delay was because of equipment thefts and attacks on the site.
BLOM Bank quitting Egypt
HARD-HIT by the catastrophic economic situation in Lebanon, the Lebanese BLOM Bank is quitting its investments in Egypt. It reported an almost 80 per cent decline in its profits last year due to the financial crisis in Lebanon, which has pushed many Lebanese to take to the streets calling for a change in the country’s ruling elites.
The spread of the Covid-19 in Lebanon and then the Beirut port explosions earlier this month made the situation worse. The Bank said in a statement that the Central Bank of Egypt (CBE) had approved a request for it to begin due diligence on transactions related to its withdrawal. Sources speaking to Reuters said that it had hired CI Capital to advise on sales that could fetch $250 to $300 million as the Lebanese lender tries to boost its capital.
The news agency added that BLOM, which has 41 branches in Egypt, had also approached potential bidders including Dubai’s biggest bank Emirates NBD. The bank’s plan to exit Egypt comes a few weeks after its rival Audi Bank tried to sell its Egyptian business to the First Abu Dhabi Bank, but the deal stalled in May after the latter cited the uncertain outlook relating to the Covid-19 pandemic.
Sixth October profits drop
THE SIXTH October for Development and Investment real-estate developer’s second quarter net profits have dropped by 77 per cent compared to their level in the second quarter of 2019 to reach LE40 million.
With 13 per cent of the company’s sales contracts cancelled during the period, its overall sales fell by 40 per cent from the same period last year. The number of units delivered fell from 441 in the second quarter of 2019 to 256 units this year, which the company attributed to Covid-19 restrictions and the majority of deliveries being postponed to the second half of the year.
*A version of this article appears in print in the 20 August, 2020 edition of Al-Ahram Weekly