Egypt's industrial authority has defended its decision to grant four small companies licenses to build steel plants, saying there is no link to the prosecution of its former chairman on corruption charges.
On Tuesday, Egypt's interim government followed the Industrial Development Authority's (IDA) recommendation and granted licenses for new factories in a bid to boost domestic production and reduce the country's reliance on overseas suppliers.
The four firms -- Port Said National Company for Steel, IIC for Steel Plants Management (Abou Hashima), Al-Marakbi and Al-Wataniya -- won their initial licenses from the IDA in December before the authority's head was arrested.
The former IDA chief, Amr Assal, was detained for 15 days on 21 February following accusations he gave a license free and without public auction to Ezz Steel for a factory in Ain El-Sokhna, an industrial town on the Red Sea.
"These [new] licenses are not the cause of Amr Assal‘s detention," Hisham El-Haroony, the current deputy chairman of the IDA, told Ahram Online.
Assal is currently facing charges of squandering LE670 million ($114 million) of public funds by issuing the licence to Ahmed Ezz, a chief whip in former President Hosni Mubarak's political party and chairman of Ezz Steel, a firm responsible for more than half of Egypt's steel market.
Assal remains in prison, awaiting trail. He was replaced as IDA head by Ismail El-Nagdi in mid-June.
The current Minister of Trade and Industry, Samir El-Sayad - characterised as indecisive by journalists and trade analysts - has also been blamed for delaying the confirmation of factory licenses. Though issued by the IDA in December, government approval for the new factories only came in early July, four months after Sayad's appointment as minister.
But the IDA deputy says this was not Sayad's fault.
"Neither the Egyptian minister of trade nor the companies' owners [directly] delayed the decision to grant licenses," says El-Haroony.
After being issued permission, all four companies requested the postponement of their license payments, worth a total of LE95 million, citing Egypt's economic downturn. The shortfall in funding was exacerbated in the aftermath of the January 25 Revolution, when bank processing was frozen for a month.
El-Haroony says El-Sayad transferred the four cases to the 'Fatwa Committee' of the State Council which spent 4 months discussing them before finally giving its approval, clearing the way for the government's final decision on Tuesday.
"Two companies, IIC for Steel Plants Management (Abou Hashima) and Al-Marakbi, today paid their dues, worth around LE70 million," El-Haroony said on Wednesday.
The annual production capacity of the four factories will be 2 million tonnes of rebar and 1 million tonnes of billet steel, the Ministry of Trade said in a statement on Tuesday. Two plants will be located in southern Egypt and the other two in the Nile Delta, with a total investment of LE3 billion (US$503.5 million).
"Steel and billet production will begin in around 2 or 3 years from now," El-Haroony says.
The new licenses will help tackle a domestic shortage of steel rebar and allow property developers to avoid supply bottlenecks, analysts say.
Despite Egypt's political upheaval, which froze property sales and increased new home cancellations, analysts expect housing demand to remain buoyant in the long-term as young couples get married each year.
The world price for billet reached $680 per ton in June against $670 in May, a rise of 1.4 per cent. Imported scrap also climbed 4.4 per cent to $447 per ton in June, according to a monthly report from Egypt's Metallurgical Chamber.
According to the Arab Union of Steel, Abu Hashima Steel Company is a privately owned importer and exporter of rebar and billets. Owned and managed by Egyptian businessman Ahmed Abou Hashima since 1998, the company serves Africa and the Middle East. Its total sales were $95 million in 2006 and $220 million in 2007.
In May the company signed a LE3 billion agreement with a Qatari firm to construct a steel industrial plant in Minya, Upper Egypt.
Port Said National Company for Steel is a subsidiary of Emirates Industrial Exceed, and began operations in Port Said in 2002, where its factory covers 50,000 square meters and produces 360,000 tons of steel per year.
El-Marakby has an annual steel production capacity of about 240,000 tons, according to the Arab Union of Steel. It was established in 2006 in 6th of October City, near Cairo.