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Liquidating the Iron and Steel iconic company: MPs grill minister

Public Enterprise Minister Hisham Tawfik faces MPs’ ire over the liquidation of the Egyptian Iron and Steel Company

Gamal Essam El-Din , Friday 5 Feb 2021
Asset stripping
Each EISC worker will receive a minimum of LE225,000 in compensation
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Three MPs directed parliamentary interpellations at Minister of Public Enterprise Hisham Tawfik this week, accusing him of taking a unilateral decision to liquidate the Helwan-based Egyptian Iron and Steel Company (EISC).

MP Mustafa Bakri said Tawfik’s liquidation decision posed a threat to national stability, constituted an insult to MPs who had voiced concern over the fate of the company and violated the constitution.

According to Bakri, Tawfik’s hostility towards public sector companies resulted in EISC’s board of directors liquidating the company and dividing it into two entities on 11 January. “This was done on the direct orders of Tawfik,” claimed Bakri. “Tawfik also ordered that other public sector companies be liquidated despite strong objections from MPs and the public.”

Bakri warned that such actions would cost thousands of jobs and opened the door wide for private sector companies to monopolise the iron and steel market. He noted that MPs had called on Tawfik in a plenary meeting on 21 January to abandon EISC’s liquidation and instead work towards improving the company’s financial position and administration.

“Parliament’s Industrial Committee also announced it would form a fact-finding commission to investigate the company’s conditions and seek solutions,” said Bakri. “Yet Minister Tawfik opted to ignore MPs and public opinion and continue with a policy that will fuel social unrest, worsen unemployment, and pave the way for private monopolies.” Bakri charged that Tewfik had also publicly accused MPs of turning public sector companies into “idols and sacred cows”.

According to Bakri, the liquidation of EISC will lead to the state losing LE12.5 billion.

“The land on which EISC is built is slated to be sold at LE495 per metre when its real value is LE5,000 per metre,” claimed Bakri. “EISC’s liquidation will also lead 7,500 workers to be laid off.”

MP Ahmed Al-Sharkawi said in his interpellation that the job of the Ministry of Public Enterprise was to reform public sector companies, develop their assets and help them access local and foreign markets, not to liquidate them and sell them off. A-Sharqawi added that as well as EISC, Tawfik was seeking to wind up the Kafr El-Dawar Spinning and Weaving Company and the Delta Fertiliser Company.

MP Maha Abdel-Nasser also accused Tawfik of “adopting a hard line towards public sector companies”.

“This is a minister who belongs to a family of investment bankers who see little value in public sector companies,” said Abdel-Nasser. “Since he came to office Minister Tawfik has ignored all requests to reform the company, insisting from the beginning on liquidating it and selling its assets to private investors.”

She argued that the EISC’s “key activity is the manufacturing of iron and steel products of the highest quality and at the lowest cost based on the needs of the local and global markets,” and as such it was a strategic asset.

Nader Riad, a high-profile industrialist who heads the Egyptian-German Businessmen Council, warned in an article in Al-Ahram on 19 January that EISC plays a key role in stabilising the price of iron products on the local market and that the liquidation of the company would allow private producers to monopolise the market and lead the prices of iron and steel products to skyrocket.

In a bid to contain public anger, Tawfik said in a TV interview that “the decision to liquidate EISC was very difficult” and likened his role to that of a surgeon who sometimes has to acknowledge that he is dealing with a hopeless case.

“I coordinated with consultants, contractors, industrial investors and watchdog authorities to reform EISC’s plant in Helwan, but all the reform plans failed,” added Tawfik.

In an interview with Al-Ahram on 31 January, Tawfik said his “main job is to reform — rather than liquidate — companies, but the conditions in the Helwan company were very complicated and it had been incurring losses since 1997.

“The accumulated losses of the company hit LE15.6 billion in 2020, a huge amount, and it suffers from serious technical problems owing to its outdated technology.

“A fact-finding committee formed by the Ministry of Finance concluded early this year that the liquidation of the company was the only available solution. The company currently employs 7,500 workers and the resolution stipulated that EISC be divided into a company for iron and steel and another for mines and quarries. The move lays the groundwork for private sector investment to play a role in the two companies in the future, and come within the state’s plans to make use of its loss-making assets and untapped opportunities,” said the minister.

Tawfik insisted EISC’s liquidation is in line with the public enterprise law which states that public sector companies will be liquidated if their losses exceed their capital.

“While EISC’s registered capital is estimated at LE500 million, its losses now stand at LE15.6 billion,” said Tawfik. He promised that “EISC workers will be offered a generous early retirement package” and that “each EISC worker will receive a minimum of LE225,000 in compensation.”

*A version of this article appears in print in the 4 February , 2021 edition of Al-Ahram Weekly

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