Saturday,21 October, 2017
Current issue | Issue 1243, (23 - 29 April 2015)
Saturday,21 October, 2017
Issue 1243, (23 - 29 April 2015)

Ahram Weekly

Briefs

Al-Ahram Weekly

CBE to hold interest rates

The Central Bank of Egypt (CBE) will keep interest rates on hold during its monetary policy committee meeting scheduled for today, according to a Reuters survey.

All five economists surveyed by Reuters expect the bank to keep its overnight rates unchanged at 9.75 per cent for lending and 8.75 per cent for deposits due to increased inflation.

Urban consumer inflation rose to 11.5 per cent in March from 10.6 per cent the previous month. The surge in prices came on the back of a slash in energy subsidies in July and a weaker Egyptian pound. The CBE eased its grip on the pound in February, leaving it to lose six per cent of its value versus the dollar in a move aimed at eradicating the parallel market. The dollar is now trading in banks at LE7.53 to the dollar compared to LE7.14 in mid-January.

The CBE unexpectedly cut interest rates by 50 basis points in January and has kept them stable since then. Critically low foreign currency reserves and a fluctuating exchange rate have also dogged the Egyptian economy since the 25 January Revolution. The economy grew by 4.3 per cent in the last quarter of 2014, compared to 6.8 per cent in the same period a year earlier. The non-oil private sector continued to shrink in the first three months of 2015, according to Reuters.


More Edita brands

Egyptian snacks producer Edita has signed two contracts worth $12 million with US-based Hostess Brands to buy the manufacturing rights of 11 new products and expand distribution. Hostess is a leading US-based producer of snack cakes with a history dating back to 1919 and well-known brands including Twinkies and Ding Dongs snacks.

Edita said the two contracts, signed on April 16, would be funded through a loan of LE90 million ($11.8 million) over seven years from the National Bank of Kuwait.

One of the contracts involves manufacturing rights for a series of products, and the other will enable Edita to extend its distribution of some goods for which it already has the rights to 12 additional Middle Eastern and North African markets.

According to the new agreements, the group’s distribution rights will be extended to   new markets including Algeria, Bahrain and Saudi Arabia. It already has the rights in Egypt, Libya, Jordan and Palestine. The company was listed on the local stock exchange earlier this month after its IPO was 4.5 times oversubscribed.

Edita is targeting sales of more than LE2.5 billion in 2015.


Ezz Steel increases stake

Ezz Steel, the largest steel producer in the local market, will increase its holdings in its flat-steel subsidiary by nine per cent to 73 per cent by converting $255 million of loans that the latter owe it into equity. “No cash will exit Ezz Steel. The capital increase will be through a debt write-off,” Kamel Galal, head of investor relations at Ezz Steel, told Reuters.

Ezz Steel had extended the loans to its subsidiary over the past three to four years to add steel rebars to its production capacity. The increase in the stake will take place through issuing 15 million shares in Egypt flat steel at $17 a share.


Tax bylaws passed

The government has passed the bylaws governing capital gains and dividends taxes, almost 10 months after the law itself was issued. According to the regulations, in taxing capital gains the law will not differentiate between individuals and corporates. The taxation will be applied once annually at the end of the year.

According to a note by Prime Holdings, a local investment bank, individuals and cooperates will not be taxed twice, meaning that if capital gains taxes are applied, the taxable amount will not be subjected to income tax. In addition, the law will not be applied to treasury bills. The rate of the tax is set at 10 per cent, but the Tax Authority will collect a six per cent tax down-payment per quarter to be deducted from the original 10 per cent.

For dividends taxes, investors whose portfolios have a turnover of LE5 million annually with dividends less than LE10,000 are exempted. If an investor receives dividends of more than LE10,000 and has less than a 25 per cent stake in a company he will pay a 10 per cent tax. This will decrease to five per cent if he owns more than 25 per cent of a company. According to Prime, the main EGX30 index has shown an increasingly steady trend in the second half of 2014 and did not seem to be worried by the release of the law in July 2014 “until recently when investors’ expectations of removing such taxes were not met. Accordingly, opposing voices have now risen to abolish the law.”

The Prime note added that the negative impacts of the government’s decision to apply capital gains taxes would be offset by its recent decision to slash income and corporate profits taxes, as this will compensate for investors’ losses due to increasing company valuations, net income and dividend payments.

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