Egypt, new dimensions, new frontiers

Mr. Adel El Danaf, Chairam of MIC Egypt -
Egyptian Joint Stock Holding Co.

"Targeting the Whole World"

Mr. Adel El DANAF
Chairman. Also chairman of Arab Iron & Stell Union, (reelected in May 2000 for three years).

Cairo, April 18th, 2000
Mr Danaf, could you tell us a little about the structural changes your company has undertaken since last year?

Last year we had fifteen affiliates, and now we have only eleven. We have privatised two of our companies. One of them was the Assiut company which has been sold totally to the Mexican company Cemex, and although we still have some shares in Amreyah Cement, this has been sold to Simpor, the Portuguese based, international cement company. Both of these companies are strategic investors. We have to make significant structural changes before we sell companies.

We also have to liquidate some companies. We have identified two companies that are impossible to restructure, and therefore must be liquidated. This is a very sensitive issue, but we have developed an equitable solution with the unions and the workers, and we have developed a good early retirement scheme and compensation package. Most of our companies have heavy debts and over-employment problems. The compensation package allows our workers to start their own businesses, or go back into agriculture, which is where many of them started out from. We have had no problems with this scheme and everyone is satisfied. It is necessary that this is so, because liquidation is substantially easier with fewer employees. One company has been liquidated already, and the other is in the process of being liquidated.

Also, we have decided to merge two similar companies. We failed to privatise the two steel structure companies SteelCo and MetalCo, because some of the factories of these companies are now in residential areas, and there was a condition that these factories should be moved into industrial areas. We didn't succeed to have good offers through tending for privatization with strategic investors, so we decided to merge them and move them both to one industrial plant in Helwan. As a result of this we will have two pieces of land to sell, one in Shobra and another in Heliopolis, which are really very valuable. We intend to sell this land and use the money to initiate an early retirement scheme, while receiving revenue from other sources as well.

The new company will be better equipped to compete on the open market. The two companies had a 40% market share in the steel structures market; electricity towers, petroleum tanks, etc.

When we interviewed you last year, you had five companies ready to privatise. Could you give us an overview of how this has gone?

Regarding Assiut Cement, it was only transferred some months ago. Everything is going well, and there have been no problems so far with the new management. You might expect some difficulties, but everything is going as planned.

Are there other companies which you are looking to privatise?

We are looking to privatise all our affiliates. This is our mission as the holding company.

What is the time frame for privatisation?

It will take us at least three years to privatise the majority of our affiliates. Then we will be left with a group of companies which will be very difficult to privatise. Our steel plant in Helwan, for example, has 21 000 workers and a very unique management structure - the management is responsible for all the activities in the company from mining in the Western Desert, construction in Helwan to the production line and the social part including housing and transport.- absolutely everything! The company was developed with the ex Soviet Union technology and once employed 24 000 workers. You can see why it will take a long time to privatise. We expect to be left with fifteen to twenty companies which will need big efforts to restructure.
One of the main conditions in the contract with the investor, or buyer, is that they must invest and upgrade. With Assiut Cement there are three production lines, we have revamped one of these lines, and the Mexican company is obliged to continue with the other two. This will add seven hundred fifty thousand tonnes capacity per year when it is finished. There have been no problems with investors complying with these conditions.

Some observers and the IMF have said that you were moving rather slowly regarding the implementation plan for early retirement and replacement of labour by fresh graduates. Could I have your opinion on this issue?

This is very much in the past. Now, they changed their views. We really do care very much about the social impact of the privatisation. We hope to overcome most of these problems through restructuring. The IMF understands what we are doing now, and we no longer hear any complaints.

Most of your companies are involved in the export business. What new markets have you broken into in the new year, with regards to privatisation and exports?

Well, we've just sold to Cemex in Mexico, and Cimpor of Portugal. We are open to any investor who comes up with a good offer. We are attempting to export all over the world. Our aluminium smelter in Upper Egypt exports at least 120,000 tonnes of aluminium per year. We export to Europe, the United States, Japan, Africa and the Arab world. Our next big challenge is increasing exports. The Government faces a high deficit in the trade balance, so exports really are a high priority, there are contracts to sell steel pipes to the US at the moment, for example. Also, joining COMESA will provide many export opportunities for us in Africa, without a doubt. We also hope that this agreement will attract further investors.

What needs to be done to increase exports in your sector?

Combining quality with low cost is vital for Egyptian exports. Most of our products have quality certification and the companies are working very hard to obtain the ISO 14 000 certification for environnement. Our industry does cause some pollution, so tackling environmental issues is paramount.

Do you have plans for local expansion?

No. We intend to sell off all our affiliates, and contract out substantially. We only make investments in order to make the companies more attractive to potential buyers. We are not actually entitled to invest for expansion.

Which companies will you focus on in the coming years?

The Egyptian Aluminium Company is now at the top of the list for privatisation. Several international aluminium companies have shown a lot of interest in this privatisation, and there are extensive negotiations underway at the moment. We must first finish with our ongoing concerns and privatize our affiliated companies Egyptian Iron & Steel Company, Egyptian Ferro Alloys Company, Aluminium company of Egypt and the Egyptian Company for Railways Wagon & Coaches (SEMAF).

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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