The week: How to revive the cities, 3 trends to follow, Varna’s polluted beaches

It's about who and why cares. So let me tell you about people who care.

With the help of the British Embassy, we've created and have been running for a third year in a row a competition called CityLovers. We recently did a tour of some of the winners. For example, the teacher in the technical school in Rakovski, who guided his pupils to create a wind turbine and thus saved his school up to 2 months of electricity bills a year (all for less than 10 thousand levs, or some 5,000 euro). Or the two young activists from Kazanlak, who teamed up with a wonderful house manager to create the first full-wall graffiti in the City of Roses (and found most of the funds themselves from the local business community). Or the two young girls who are now 10th grade and are still chasing their dream of creating an energy-producing shopping cart to power up phones and stores. They are currently trying it out at Metro Cash&Carry in Burgas, but hopefully they will find soon enough a start-up fund to finance their project.

Those are people who care. They invest the most precious thing they have - their time and energy - into projects which just might transform the environment they live in, bit by bit.

There are also businesses that do that. For example, Asarel-Medet copper ore mining and processing company in Panagyurishte, have invested heavily into the local community's infrastructure: a school, a hospital, a sports arena. The founder of Econt courier service has invested into renovating and keeping the old houses in the fabulous city of Ruse. Yet those are, by and large, very few examples in a country which badly needs more.

I've talked to plenty of business people here and let me tell you: most of them will hesitate investing anything beyond the bare minimum needed to keep their business going. What gets measured, gets treasured. I get it. Bulgaria went through a lot of turbulence and the prime goal of any business is to make money, not to give them away. Why on earth would any company invest in, say, a graffiti wall?

The simple answer is: because it shows they care, too.

Your business is carried out by people. Outside of their workplace, those people exist in a world made of potholes, playgrounds, buses, but also restaurants, movies, art, public spaces, daycares, schools, bike-lanes, trips to the doctor, meet-ups, dates, hikes. If they don't like the world around them, they will try to change it or move to a better one. And if you want them to stick around and work for you, you might as well help with that.

Mercedes-Benz donates millions of euro each year to its home city of Stuttgart, renovating public spaces and buildings, not because its business depends on the city, but because they recognize it as part of their identity. Microsoft runs a whole host of initiatives, from education to arts, in its home city of Redmond. Apple has a Strengthen Local Communities program, targeted at places where its employees work.

Bulgarian companies spent decades with heads in the sand, pretending the cities they operate in are not something they care about or they can do anything for. Now, faced with the harsh reality of being unable to attract anyone to those places, they realize it's time to start rethinking this paradigm.

This newsletter is helped by

Martin Dimitrov

Politics this week:

The puzzle shifts

So while we were away, things moved on. The ruling majority in Parliament decided to launch an attack on the Lukoil Neftochim Burgas refinery, which is almost inevitably destined to end with taking the asset out of Russian hands. Vasil Bozhkov, the fugitive tycoon sanctioned under the Global Magnitsky Actreturned home and was arrested. Another figure from the murky 90s, the founder of Lev Ins insurance company Alexey Petrov, was shot dead. So basically, Russia and the U.S. are fighting for supremacy in Bulgaria, while shadowy figures are cleared from the board: it smells like the 90s again.

Amidst this sudden turbulence, here are some signposts to watch.

1. Borissov works on his get-out-of-jail card

The leader of GERB is still vocal and keeps on publishing the odd Facebook commentary on the dealings of the government, but he also seems to be engaged in a silent mission to clear all the threats against him. The case for the famous locker stashed with gold bars and cash was closed for lack of evidence of crime. The Barcelonagate case dropped out of the media spotlight, the prosecution closed the doors on it again and no one believes the long-time friend of GERB and current Chief Prosecutor Borislav Sarafov will do anything about it. Nobody claims the former PM took any bribe, except for Mr. Bozhkov, but we're yet to see if he will be so vocal after his initial stay in police custody. The gut feeling of people I spoke with is he's done a deal and will be free to go. The only cloud above his head is the leak of documents regarding the TurkStream gas pipeline project, but that won't make much of a dent inside (see below).

2. Peevski cements his power Which leads us to the second great player on the field - the everlasting Mr. Peevski who was also sanctioned under the Magnitsky Act. He seems to be well entrenched in his own party, the MRF, as well as in GERB. He was the driving force behind the asaault on the Lukoil-Rosenets oil terminal. Sources told Capital Weekly that he's moving most of his pawns on the board - from energy and road-building to the judicial system, in order to realign his position and simultaneously make good with the Americans, whitewash his image and stay a relevant player. The government, it seems, is playing an unwitting role in this.

3. European prosecution enters the building In this rather bleak landscape, the only major unknown, which has the potential to rock the boat and throw it off balance, is Laura Kovesi. Some time ago, the European Prosecution Office started investigating hundreds of cases in Bulgaria, spanning years of misuse of EU funding. Those have started bearing fruit: a major railway project has been stopped with the offices of two companies raided. Both of them won suspicious procurement contracts: one of the two claimed experience based on a joint-venture with a Spanish company which had gone bankrupt a month earlier - Contratas Iglesias. They were most likely a facade and now the question will be where has the money gone.

TurkStream leaks

While it has always been clear that Borissov's government pushed through the Russian gas pipeline to Serbia and Hungary through Bulgarian territory breaking all the rules and regulations, the leaks published by the Anti-Corruption Fund contain sensitive information from a Russian politician's mailbox. Mails to and from Alexander Babakov reveal the negotiations between Russian company TMK and a Saudi one - Arkad, for the completion of the pipeline. Those are made in complete disregard of the Bulgarian procurement law and with the knowledge of the Bulgarian side. While Borissov himself is yet to be found named in the documents, it's more than clear such a scheme would have been impossible without his approval.

Economy:

Bulgarian economy is losing steam this summer

The gradual cooling of the Bulgarian economy that began in early 2023 continued in the second quarter. The country's GDP increased at a slightly slower rate of 1.8% year on year, compared to a 2.1% increase in January-March. According to National Statistical Institute (NSI) flash data, GDP increased by 0.4% in April-June on a quarterly basis. Consumption remains the economy's main growth engine, though its expansion is slowing, while net exports and investments are growing at slightly faster rates. Read all about it in KInsights' piece from earlier this week.

Oil producers: the collateral casualty

Do you remember how Bulgarian grain producers lobbied so hard earlier this year to stop the Ukrainian grain imports that were allegedly undermining their business? They succeeded - but the hidden costs of the embargo have become visible in other sectors just now. Last year the sunflower oil factories in Bulgaria broke a record - they exported products for over 3 billion BGN. This record will not be repeated this year, as several factories are not working because they have no access to Ukrainian sunflower seed and are under pressure to buy expensive local produce instead. Market mechanisms are not working at the moment because the available cheap Ukrainian raw material was stopped flowing in.

Figures:

1.8% - the country's annual GDP growth rate for Q2

6-10% - the average growth in salaries this year at 350 Bulgarian companies interviewed by the human resource firm Tack TMI Bulgaria

Business:

Pharmaceuticals

Sopharma

One of the largest local companies listed on the Bulgarian Stock Exchange with a market capitalization of about BGN 780 million, announced that it is launching the conversion of warrants issued in 2021 into shares, through which it could potentially raise BGN 185.5 million in fresh capital.

Renewables

Filcab

The photovoltaic company will launch its own 18-MWh solar park near Plovdiv. The investment worth 13.2 million euro will become operational by the end of the year and will sell energy to the market.

Energy

ESO The Electricity System Operator (ESO) reported a huge jump in profit in Q2 2023. The net profit reached BGN 133.2 million against only BGN 59.4 million for the same period last year, the company's financial statement shows.

ENERGY:

Gas exploration at Han Tervel block in the Black Sea

The government has launched yet another tender for oil and gas exploration and prospecting in the 1-26 Khan Tervel block in the deep waters of the Black Sea, off the coast of Varna.

Watch out for:

People: Vasil Bozhkov

The gambling mogul who fled Bulgaria after Peevski and Borissov attacked his business several years ago, has come back half-heartedly from Dubai (it turned out he was given a deadline to leave) and obviously tried to make a deal on his return. In the next few weeks it will become clear if he has managed to do so, or he will keep on bashing Boyko Borissov for bribe-taking.

Ivan Portnih

The Varna mayor has known for at least 5 years that the city's beaches are polluted massively by waste waters but did nothing to remedy the situation, claims Dnevnik. The local health inspectorate was signaling the local authorities for years about the situation on Varna's Central and South beaches in Varna, yet Portnih's people turned a deaf ear.

Date

30 September

Is the deadline for Kapital's new Factory of the Year contest! We are running it for the second year in a row and believe me, it's the fairest competition you'll find in Bulgaria: we have 4 different audits in 4 different sections and we aim to find the best factories here. So do apply and get to wear this badge for a whole year!

Location:

Ivan Vazov Str., Plovdiv

The city on 7 hills will open up to a new festival during 1st-6th of September. It's called Stationary Road and is devoted to this gem of a street in the heart of Plovdiv. Ivan Vazov Str. is home to many great houses belonging to the old money of Plovdiv, since the time of the thriving tobacco trade. The street will be closed for traffic and open for parties: expect art, concerts, and non-stop tours.

Dunav Bridge, Ruse

Passing through the already jammed border-crossing with Romania will become even more problematic, since the bridge is closing for renovation. It will operate only in one track for the next 2 years, while its two lanes are being renovated.

Word of the week

Sglobka (Assemblage)

The wholehearted attempts by WCC-DB to not call their power sharing agreement with GERB in parliament and in government for what it is - a coalition - gave birth to a new meme to describe the type of government that Bulgaria currently has: the word 'sglobka', which directly translates to 'assemblage' but means much more than that in Bulgarian. To be more precise, sglobka rather means a half-baked solution that keeps things going but might fail you at any time. Just like the Denkov-Gabriel government. The funniest thing about the word is how it is now mainstream, as all media websites and even GERB leader Boyko Borissov refer to the governing solutions with the half-derogatory, half-amusing term.