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Egypt will launch the Middle East’s first commodities exchange

19 February 2016 Comments (0) Business, Featured, Middle East

egypt exchange

As the nation seeks to become a global trade center for grain, it will open an exchange focused on agricultural products this year.

Egypt plans to launch a commodities exchange focused on agricultural products, the first of its kind in the Middle East as part of the nation’s goal of developing a major trade and processing hub for grain on the Mediterranean coast.

According to Egyptian Minister of Supply Khaled Hanafy, the government plans to begin operating the commodities exchange by the end of this year.

Meanwhile, Hanafy has also been courting international investors for a $2 billion initiative to turn Egypt into a global grain-trading hub.

The Egyptian government wants to make the country a major center for processing and re-exporting wheat, maize, soy, and other commodities. Grain is a significant crop in Egypt but it is also the world’s largest wheat importer.

Development of Damietta as major port

The government is proposing a mega-development in the port of Damietta on the Mediterranean coast, including new piers that could receive giant tankers and ships.

The plan was approved by President Fattah al-Sisi in October and the project is to be finished in two years.

Hanafy cited Egypt’s strategic location with access to markets in Europe, Africa and the Middle East, with 1.6 billion consumers as well as its access to the Suez Canal, as key advantages of the initiative.

Currently, major trade routes for grain are across the Pacific and Atlantic oceans and the western Mediterranean. Major exporters, including Russia and the United States, have direct access to markets in Asia, Latin America and Europe.

Egypt’s proposed hub could also find competition in plans to develop nearby Suez Canal ports such as Djibouti into global trade hubs.

Damietta

Damietta

Egypt seeks investors

Hanafy has met with officials and investors from Russia, the United States of America, the United Arab Emirates, Sudan and Slovenia.

He said the Egyptian government is working in cooperation with the Egyptian Exchange market and the Egyptian Financial Supervisory Authority, the government regulating agency, to launch the commodities exchange.

The commodity exchange will include commodity producers, a spot market for buying and selling securities, and storage and grading hubs.

Farmers can use mobile application

Egyptian farmers will be offered a mobile application that will enable the market to track their output, electronically linking their crops to the exchange, according to Iman al Mutlaq, chief executive of Sigma Investments, which is working on the project.

Mutlaq said it would begin with six agricultural commodities plus oil and gold. She said a small number of commodities would help promote high volumes.

The government is working on guidelines for pricing and products, which will need to be in place before the exchange opens. It also will begin issuing certificates of origin.

Agricultural production needs to increase

The government believes the commodities exchange will boost development of Egypt’s highly fragmented agricultural lands, Hanafy said.

Egypt wants to reduce grain imports while improving domestic production that is approaching $100 million to supply a rapidly growing population.

Egypt increased agricultural production by 20 percent between 2004 and 2014. Sisi recently called for  increased production by 2030 through modernization and support for small farmers.

Lack of silos results in waste

The nation has struggled to make agricultural operations efficient. Lack of modern storage facilities is part of the problem. The country stores much of its wheat in open lots, causing an estimated loss of 30 percent. The United Arab Emirates recently agreed to provide funding to Egypt for two dozen silos.

Limited land available for agriculture is another challenge. Only about three percent of the land in the country is suitable for agriculture.

Agriculture experts say in the future, production in the Euphrates and Tigris river basins could increase enough to support a regional grain market in the Middle East. For now, however, war in Iraq and Syria has disrupted grain production.

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GM suspends Egypt operations due to currency crisis: company source

9 February 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – General Motors has temporarily suspended its operations in Egypt due a currency crisis, a company source told Reuters on Monday.

Import-dependent Egypt has been in economic crisis since a 2011 uprising and susequent political turmoil drove foreign investors and tourists away. Dollar reserves have more than halved to $16.4 billion since then.

“The entire sector has a currency crisis we can’t make a car without some of the parts. We stopped production temporarily as of yesterday until we can clear the imports held up in customs,” the source said.

“There is still some leeway with the government and the banks to solve the issue.”

General Motors’s Egypt operation includes assembling trucks and cars. It makes 25 percent of Egypt’s vehicles.

Egypt’s central bank has been rationing dollars and keeping the pound artificially strong at 7.7301 per dollar through weekly dollar auctions.

 

(Reporting Ehab Farouk; Writing by Ahmed Aboulenein; Editing by Louise Ireland)

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Egypt sees World Bank funds arriving soon, eyes more Saudi aid

4 February 2016 Comments (0) Latest Updates from Reuters, Middle East, Politics

CAIRO (Reuters) – Egypt expects to receive a $1 billion World Bank loan approved in December once outstanding paperwork is finalised and is negotiating to secure more aid from Saudi Arabia, International Cooperation Minister Sahar Nasr said on Thursday.

Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy battered by political upheaval since the 2011 revolt and ease a dollar shortage that has crippled import activity and hampered recovery.

The first $1 billion tranche of a three-year, $3 billion loan from the World Bank to support Egypt’s budget was approved by the lender in December and was expected to arrive soon after.

But Egyptian media has questioned whether the money would come as the programme is linked to the government’s economic reform programme, including plans for value-added tax (VAT).

Egypt’s new parliament, which held its first session last month, ratified the vast majority of economic laws passed by presidential decree during the three years in which Egypt did not have a legislative house. But it has yet to ratify the government’s economic plan or the World Bank loan itself.

“We are just working on submitting the required documentation. It is nothing. We are normal. There is nothing (to say) about it,” Nasr told Reuters in a telephone interview.

“We need all the documentation, any law, any decree that we put we have to submit in English … Decrees on subsidies, laws for the establishment of industrial zones, fiscal reforms … I thought I would wait for parliament to ratify everything meanwhile.”

The World Bank told Reuters in December that the first tranche was focused on “10 prior actions for policy and institutional reforms” already implemented. The second and third tranches are linked to additional reforms the government plans.

“The whole reform programme will need to be done and not just the VAT being out. We need to have executive regulation in place and be operational,” said Nasr, an ex-World Bank official.

Nasr said a $500 million loan for budget support from the African Development Bank, part of a $1.5 billion three-year programme also signed in December, had been transferred.

Since those loans were approved Egypt has secured multi-billion-dollar aid commitments both from China and Saudi Arabia and signed major investment deals with Russia.

 

MORE SAUDI AID?

Egypt was in talks with Saudi Arabia to secure more aid, Nasr said, declining to give details.

Egypt was also working to iron out the details of a Saudi pledge to invest $8 billion in Egypt but Nasr said she was taking time to approve projects that were ready to go.

Egypt has previously signed preliminary deals on big-ticket investments that were later downsized or delayed.

Nasr said the government was still negotiating the details of a Saudi pledge to provide Egypt with petroleum aid over five years. Egypt signed an initial three-month deal with Riyadh to meet immediate needs while talks were ongoing.

“I wanted to make sure the three months are covered and to give myself time to make an even better deal for a five-year plan,” she said.

Egypt spends roughly $700 million a month on petroleum product imports. While it has benefited from plummeting global oil prices, a forex shortage has made it harder for import-reliant Egypt to finance shipments.

Last month, a BP tanker carrying liquefied natural gas was diverted from Egypt in what traders said was a sign that the currency crisis was jeopardising energy supplies.

BP and the government denied any payment problems and said the shipment was delayed by mutual agreement.

Nasr said the shipment was delayed because Egypt had managed to secure its needs more cheaply elsewhere.

“If we get a better deal at a better rate for this month, we will take the better rate,” she said.

 

(By Lin Noueihed. Editing by Michael Georgy and Alison Williams)

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El Sewedy Electric unit in $484.5 mil Angola power stations deal

3 February 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – A subsidiary of El Sewedy Electric has signed a $484.5 million contract to build three power stations in Angola but the deal is “not yet in effect”, the Egyptian firm said in a bourse statement on Wednesday.

The contract between subsidiary El Sewedy Power and the Angolan government is subject to approval by Angola’s president and a specialised court, it said.

“The contract involves supplying, building, operating, financing and maintaining the stations. The project will be done during 2016 but the contract is not yet in effect and is suspended on certain conditions, including the president’s approval,” it said.

 

(Reporting by Asma Alsharif; editing by Jason Neely)

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Egypt’s NBE bank sold $2.5 bil in 3 months to cover imports

31 January 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

SHARM AL-SHEIKH, Egypt (Reuters) – Egypt’s biggest lender, the state-owned National Bank of Egypt, provided more than $2.5 billion to cover import payments in the last three months as the country faces a currency crisis, Chairman Hisham Okasha told Reuters in an interview.

Egypt, which depends heavily on imports, has been suffering from a worsening dollar crunch since a 2011 uprising drove away foreign investors and tourists, both major sources of hard currency.

In its latest effort to curb dollar spending on imports, Egypt announced on Sunday it would raise tariff rates on a series of goods from Feb. 1.

“During November, December and January we opened letters of credit worth more than $2.5 billion to meet import payments,” Okasha told Reuters on the sidelines of a banking conference in Sharm al-Sheikh.

In December, the central bank said it sold $7.6 billion in previous weeks to help importers pay for goods. It was not clear whether NBE’s dollar injection was part of the central bank’s $7.6 billion.

No comparative figures for letters of credit opened were immediately available as banks are not required to disclose them.

The central bank has been keeping the pound artificially strong at 7.7301 pounds to the dollar, burning through its reserves which tumbled to around $16.4 billion in December from $36 billion in 2011.

In order to fight a black market the central bank imposed a cap of $50,000 a month on dollar deposits at banks, making it harder for importers to open letters of credit and clear cargoes.

It later raised the cap to $250,000 but only on specific imports of essential goods, capital machinery and manufacturing components and medicines.

Okasha also said his bank aims to increase its deposits and loans portfolio by around 15 percent by the end of 2015/16.

The bank’s loans portfolio was around 140 billion pounds in June 2015, while deposits were 447 billion pounds.

“Deposits reached more than 485 billion pounds by the end of December 2015 while loans reached around 178 billion pounds,” Okasha said.

 

(Reporting by Ehab Farouk; Writing by Asma Alsharif; Editing by Raissa Kasolowsky)

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Egypt’s central bank tightens import controls to boost local production

22 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s central bank will tighten import regulations from January in a bid to support local manufacturing and better preserve its dwindling foreign currency reserves.

Egypt, which depends on imports, has faced a currency crisis since a 2011 uprising drove foreign investors and tourists away. Hard currency reserves have more than halved $16.4 billion since then.

The decision excludes imports of medicine, foods, and other essential goods such as wheat.

The central bank said it aimed to “strengthen the national economy and promote local products, enhancing their competitiveness against foreign products,” in a statement on Tuesday.

Egyptian manufacturers have been pushing for stricter regulations to stop importers putting artificially low values on customs bills to avoid duties, a widespread practice that makes it difficult for local products to compete on price.

Egypt had imports worth $60.8 billion in 2014/15, compared with exports worth $22.1 billion, said Beltone Financial economist Ziad Waleed.

“They are just fine-tuning the present regulations amid the foreign currency shortage. This definitely could increase the pressure on importers,” he said.

The statement said that banks should obtain documents for imports directly from foreign banks, instead of obtaining them from the clients as is the practice currently. This is to stop any manipulation of receipts by importers, the Egyptian customs authority said on Tuesday.

Importers will also have to provide 100 percent of the cash deposit on letters of credit for imports instead of the current 50 percent.

“The central bank is trying to use all available measures to try to limit imports and this could limit the import of luxury goods, but it is not the key solution that would solve the foreign currency shortage,” Waleed said.

Egypt’s central bank has been rationing dollars and keeping the currency artificially strong at 7.7301 through weekly dollar auctions, giving priority to imports of essential goods.

 

 

(Reporting by Asma Alsharif and Ehab Farouk, editing by Louise Heavens)

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African Development Bank approves $1.5 billion loan to Egypt

15 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – The African Development Bank (AfDB) has approved a $1.5 billion loan to Egypt to be paid out over three years, International Cooperation Minister Sahar Nasr told Reuters on Tuesday.

The first $500 million of the loan will arrive within days, said Nasr, and will go toward the government’s economic development programme and national projects.

“We have a competitive economic reform programme that started more than a year back and based on that we are taking the first tranche,” Nasr, a former World Bank official, told Reuters by telephone.

Egypt expects to receive an additional $1 billion from the World Bank by the end of the year to support the budget and could discuss potential IMF financing once parliament convenes, Nasr told Reuters previously.

“The bank’s approval today is a strong message affirming that the Egyptian economy is moving at a steady pace towards achieving comprehensive development and confirms that the bank is confident in the government’s reform process,” said AfDB representative Leila Mokaddem.

A foreign currency shortage has crippled import activity this year and the country has scrambled to find new sources of dollars as shipments have piled up at ports and manufacturing has slowed.

Foreign currency reserves, which stood at about $36 billion before the 2011 uprising that toppled veteran ruler Hosni Mubarak, were $16.42 billion at the end of November despite billions of dollars in Gulf Arab aid that Egypt has received since mid-2013.

 

(Reporting by Lin Noueihed; Writing by Eric Knecht; Editing by Mark Trevelyan)

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Rising food prices push up Egypt’s inflation

10 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s urban consumer inflation jumped to its highest level since June, data from the state statistics agency showed on Thursday, propelled by the rising cost of food even as the state takes new measures to keep prices in check.

The figure rose to 11.1 percent in November from 9.7 percent in October, CAPMAS said, compared with 11.4 percent in June.

Egypt said in November it would control the prices of ten essential commodities and use its state grain buying agency to import a broader array of goods in an effort to curb inflation.

However, November core inflation, which excludes volatile items such as fruits and vegetables, rose to 7.44 percent from 6.26 percent in October, the central bank said.

The higher inflation figures might influence the central bank’s decision on interest rates at a monetary policy committee meeting scheduled for next week, Capital Economics said in a research note on Thursday.

“For now, with the domestic economy struggling, we suspect that interest rates will be left on hold next week. But today’s figures … mean that there is a growing risk that the (central bank) will be spooked and decide to hike rates,” the note said.

 

(Reporting by Eric Knecht; Editing by Louise Ireland)

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With new central bank leadership, Egypt repays foreign investors

1 December 2015 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s central bank revised the way it allocates dollars at auctions, seeking on Tuesday to reassure markets by repaying foreign investors a backlog of more than $500 million built up during a long-running dollar shortage.

The economy has been in disarray since the 2011 uprising that ended Hosni Mubarak’s 30-year rule, spooking foreign investors and tourists who are the main sources of foreign currency.

Foreign currency reserves have dropped from $36 billion before the revolt to about $16.4 billion in October, leaving the central bank with little firepower to protect the value of the tightly-managed Egyptian pound.

In February, the central bank limited the amount of dollars companies could deposit in banks to squeeze a dollar black market.

Business people say that policy backfired, making it difficult for companies to finance imports and discouraging foreign investors who feared they would be unable to repatriate profits or cash in their investments.

In the first major move by Egypt’s new governor Tarek Amer, who took up his post on Friday, the central bank said it had repaid foreign portfolio investors $547.2 million, clearing the entire backlog.

“This is a very strong signal about the change in management ideology,” said Hany Farahat, senior economist at CI Capital.

“There has not been an indication of where such sources of funding have come from… It might just be more aggressive use of the reserves available at the bank.”

The central bank urged foreign investors to enter Egyptian capital markets through a pre-existing scheme set up to help them repatriate their hard currency.

Those who have used the scheme have not faced delays, the central bank said in a statement. But many foreigners have invested without using that mechanism and had struggled — until Tuesday — to obtain dollars and move them out of Egypt.

The measure is the latest in a series taken by the central bank since Amer’s appointment was announced in late October.

Within two weeks of the announcement, banks had supplied $1.8 billion to clear a backlog of imports that had caused an outcry among businesses.

The following week, state banks raised interest rates on certificates of deposit to 12.5 percent from about 10 percent aiming, economists said, to limit dollarisation ahead of a potential devaluation.

Amer’s next move came on Nov. 11, when the central bank supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies during the crisis.

Mohamed El Sewedy, the head of the Federation of Egyptian Industries, told Reuters in a recent interview Amer had promised to cover the entire $4 billion exposure.

At the same time, the central bank strengthened the pound by 20 piastres — a surprise move given the gap with the black market rate, now hovering about 8.5 pounds to the dollar.

Some economists criticised the revaluation but others said it was aimed at shaking out speculators making downward bets on the pound, with a view to eventually allowing a downward drift.

 

CURRENCY AUCTION

The central bank held the pound steady at 7.7301 to the dollar at its second official dollar auction under Amer, but caused confusion by supplying some banks with more of their forex needs than usual and others with nothing at all.

Egypt’s central bank holds three foreign exchange auctions a week, and the sales are the key mechanism through which it sets the official exchange rate of the pound.

Banks are accustomed to receiving a regular quota of foreign exchange at each foreign currency sale.

Bankers said some banks had bid late in the auction due to uncertainty over whether the central bank would move the exchange rate or hold it steady and had missed out. Others said some banks who bid early in the session were also refused.

The central bank said it had changed the “internal allocation process” but gave no details on the changes or whether they would apply to future forex auctions.

Amer, the well-regarded former head of commercial lender National Bank of Egypt (NBE), faces a delicate balancing act as he seeks to end the foreign exchange pressure without triggering inflation, which hurts the poor hardest, or dampening the growth needed to create jobs for its growing population.

 

(By Asma Alsharif. Additional reporting by Eric Knecht’ Writing by Lin Noueihed; Editing by Ruth Pitchford)

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Egypt’s stock exchange will allow ten companies to delay IPOs

1 December 2015 Comments (0) Australia, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – The Egyptian stock exchange will allow ten companies to delay their initial public offerings due to global market conditions, Mohamed Omran, the head of the bourse, told state news agency MENA on Tuesday.

The Egyptian exchange usually requires newly listed companies to hold an initial public offering within six months, but this period can be extended if there are good reasons, such as volatile global markets.

Omran told Reuters in November that about a dozen companies had registered a new listing on the Egyptian market in 2015, but only half of these had proceeded with an initial share issue.

 

(Reporting by Eric Knecht, editing by Louise Heavens)

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