Top cement company executives found guilty of price-fixing, a real estate magnate on trial for murder, a UAE-based property giant accused of causing a deadly rockslide – these were just some of the year’s headlines as rumors and scandals involving high profile businessmen swirled.
On the heels of a ravenous real estate sector and with skyrocketing construction costs, 20 Egyptian cement executives found themselves facing criminal charges of colluding to fix prices and controlling the national supply of cement.
The trial – which began in February – was the first of its kind under Egypt’s three-year-old anti-monopoly law.
Defendants included senior executives from Suez Cement, Misr Beni Suef Cement, Misr Qena Cement, Torah Cement, Al-Ameriyah Cement, Cemex, National Cement Company and Sinai Cement.
After almost six months, the court announced its verdict in August, finding the executives guilty of price-fixing and slapping each with a LE 10 million fine.
The court ruled that the increase in prices – which exceeded 33 percent between 2003 and 2004 – was not justifiable when compared to costs, which rose only 10 percent. The court said that prices in 2006 jumped 14 percent, while the cost of production actually decreased by 3 percent. All of the defendants denied the charges and their appeals are pending.
One of the most prominent movers and shakers in the country, Egyptian billionaire Hisham Talaat Moustafa was put on trial for the murder of a Lebanese singer in Dubai.
News about the parliamentarian from the ruling National Democratic Party and then-chairman of Talaat Moustafa Group (TMG) – Egypt’s largest real estate developer by market value – made headlines around the world from both economic and political angles.
Amid the summer’s real estate boom, rumors surfaced that Moustafa was connected to the brutal murder of Lebanese singer Suzanne Tamim, who was stabbed several times and had her throat slit on July 28 in Dubai.
Rumors that Moustafa had fled the country took a toll on the company’s shares on the stock market, slamming it by almost 22 percent in only two days of trading.
In an attempt to dispel rumors, Moustafa appeared twice on Egyptian national television in early August, calling for a crackdown on the spread of false information that he warned could shake confidence in Egypt’s financial institutions and economy as a whole.
On Sept. 2, the Egyptian prosecutor charged Moustafa for paying former policeman Mohsen El-Sokkari $2 million to kill Tamim, his alleged former lover. Tamim, 30, had reportedly turned down a marriage offer from Moustafa, 49, and was living in Dubai with an Iraqi kick boxer.
Shares in TMG plunged around 24 percent in just two sessions to an all-time low of LE 4.86 as reports of the murder reached the market. The stock, the fourth-worst performer on Egypt’s benchmark CASE 30 index, tumbled more than 70 percent this year.
Following Moustafa’s arrest, the company appointed Tarek Talaat Moustafa as chairman and managing director to replace his younger brother.
Both defendants pleaded not guilty when the trial began on Oct. 18. The two were denied bail, and the trial was adjourned until Nov. 15. On the first day of the trial, the judge ordered a media blackout and cleared the courthouse of journalists on the grounds that reports about the case could influence public opinion. Publishing bans on reporting details of the sensational murder investigation and trial have been enacted twice.
Dubbed “crime of the year, the case sparked a media frenzy, and several journalists protested against the imposed ban with some publications continuing to carry stories referring to the case.
On Nov. 25, Egypt’s public prosecutor charged five journalists with breaking the ban. The maximum possible sentence for the offense is a year in prison and a fine of LE 10,000 ($1,800).
Just as fears of a real estate crumble began to mount in the Gulf Arab region, UAE-based Emaar Misr was dragged into a media battle when local press reported in late October that tensions were simmering between the Cairo governorate and the company over whether to halt the construction of its $12 billion Uptown Cairo project on the Moqattam hill.
The Egyptian press reported that the Cairo Governor Abdel-Azim Wazir had issued a directive to halt construction on the Uptown Cairo project following the massive rockslide that claimed lives of over 100 people in the shantytown of Duweiqa in early September.
Three-and-a-half kilometers from the site, the project’s golf courses were said to have been the culprit, with irrigation water permeating and loosening the rocks.
According to local press reports, Emaar Misr refused to halt construction and proceeded with the project, denying media reports that construction caused the Duweiqa rockslide and stressing that the project complied with all requisite governmental stipulations.
Off the real estate buzz comes the EAgrium fiasco to build a $1.2 billion (LE 6.4 billion) nitrogen facility near Damietta after months of grassroots opposition. When majority Canadian-owned company EAgrium revealed plans it would begin construction on its fertilizer giant in Damietta early this year, it sprouted Egypt’s first “not-in-my-backyard anti-corporate movement.
In a grassroots campaign aimed at halting the project, Damietta residents formed an anti-Agrium committee to organize and voice their opposition. The committee claimed the plant would damage both the environment and the health of local residents, as well as squash the area’s growing tourism industry. As a result of mounting local pressure, the government put the project on hold in late April. It later announced that it would stop the plant’s construction despite absence of any legal infringements or environmental violations on the part of Agrium. Many were concerned this decision would have a negative impact on foreign investment in Egypt.
The government initially suggested relocating the facility, while Agrium released a statement announcing it would be “aggressively pursuing full recovery of its costs, equity contribution and future lost profits.
Agrium estimated it invested $165 million (LE 883 million) in the project and said it would also seek compensation for lost profits, ongoing finance costs and equity commitment. All this could have put the compensation claim against the Egyptian government near $500 million (LE 2.7 billion), though Agrium did not confirm the figure.
The government consequently came out with two counter-offers, including a buyout of Agrium’s investment in the project thus far and a transfer of a stake of the government-owned nitrogen facility to be built adjacent to the EAgrium site.
After a three-month battle between local residents, government officials and Agrium executives, the project was officially dissolved in August.
Following Agrium came another fiasco, this time in the banking sector. In late June, the government failed to privatize its third largest bank, Banque Du Caire, after receiving five of what it described as inadequate bids.
In what could have been Egypt’s largest privatization process since the sale of Bank of Alexandria in 2006, five regional and international players lined up on June 24 to bid for a 67 percent stake in Banque Du Caire.
Government officials were optimistic that privatizing the bank, which holds 6 percent market share, would fetch even higher bids than the $1.6 billion (LE 8.85 billion) that Sanpaolo of Italy paid to acquire 80 percent of Bank of Alexandria.
However, when the top bid from National Bank of Greece valued the bank at around $2 billion (LE 11 billion) – equal to $1.36 billion (LE 7.5 billion) for the 67 percent stake – the government cancelled the auction, saying it was $200 million lower than its reserve price.
The government initially expected the auction would fetch up to $2.4 billion for the entire bank, or $1.6 billion for the 67 percent stake.
With major banks taking a severe beating by the global financial turmoil, finance experts said the government lost out when it canceled the sal
e of the bank ahead of the market crisis.
Egyptian Prime Minister Ahmed Nazif justified the decision by saying “the circumstances are inappropriate at this stage, hinting at the global financial crisis.
Minister of Investment Mahmoud Mohieldin said he did not regret the decision, adding the government will reconsider the possibility of selling the bank “when time allows.