By Mohamed Ahmed
Can the arrest of Salah Diab and his son Tawfik happen to anyone else? This is the question that currently dominates the business community, in light of the lack of transparency surrounding the reasons for their arrests, and the circumstances surrounding the arrests, in which they were dragged in handcuffs.
This question may be important for businessmen, but the repercussions of prosecuting business leaders are certainly going to impact the investment climate. The stock market is also suffering after Salah and Tawfik Diab’s stocks were frozen, as well as the assets of Juhayna Food Industries CEO Safwan Thabet, on charges of funding the Muslim Brotherhood.
Financial advisors and risk management experts believe the incident left the business community and major investors sceptical about the way the state deals with them. Many say there are two reasons; first is that the largest segment of investors are exposed to Diab’s fate since they have rarely abided to the law in the past two years, whether intentionally or not.
The second reason is an important hypothesis: will one inject more investment when they are under the threat of defamation? A trend of keeping investments to a minimum is dominating the business community, at least until the state reconsiders its policy in dealing with investors.
The Cairo Criminal Court decided on Wednesday to release Salah Diab on EGP 50,000 bail and his son on EGP 10,000 bail. The court also decided to amend the Prosecutor General’s request to freeze their assets, along with 13 other businessmen. They were charged with changing the activity of land owned by New Giza for Real Estate Investment, in which they are partners, from agriculture projects to housing and tourism. The court decided to limit freezing assets of the New Giza Company.
This happened a day after the South Giza Court issued a decision to imprison Salah Diab for 15 days, pending investigations, charging him with possessing an unlicensed gun in the villa where he lives. However, the Prosecutor General’s decision to release him due to his medical condition kept him out from jail.
Absence of investment safety
Banking and Risk Management expert Amr El-Kady explained that the way in which Diab was arrested indicates intent to defame the businessman and his son, especially since the charges were announced late, and not on the night of their arrest.
El-Kady said the circumstances of the incident raised investors’ concerns about how the state deals with them in the event of any wrongdoing, especially since the largest segment of the business community committed financial or administrative irregularities at one point.
The business community is waiting for the state to come clear and announce how it will deal with investors in cases of irregularities. “Who will keep investing money or even keep its existing investments under the threat of being defamed and humiliated like that?” he said. “How can young businessmen expand their planned investments, having been treated this way?”
New development in the worsening investment climate
Some experts believe this bad climate indicates a new stage of crippling investments, both directly and indirectly. Managing Director of Archer Capital Investment Nader Ibrahim said recent investors’ problems are all related to cancelled contracts and agreements by the state. However, the community is now worried about them threatening investors for undisclosed reasons.
Ibrahim said if the case was linked to an economic violation, Diab’s house should have been searched, but simply accusing the businessmen of possessing an unlicensed weapon only indicates an intention of defaming them.
The reason behind threatening businessmen may be forcing them to donate to funds, such as the “Tahya Masr” (Long Live Egypt) fund or their ownership of the daily Al-Masry Al-Youm newspaper.
However, news cited Diab donating $6.5m to the Tahya Masr fund in July 2014 after meeting President Abdel Fattah Al-Sisi, among a delegation of businessmen.
Stock market continues to take hits
The stock market usually reflects economic events, and case time was not an exception, since it plumetted after the Diabs’ arrests. Mubasher’s General Manager and Board Member Ehab Rashad said the arrests doubled the decline of the stock market.
He said the capital market lost billions of pounds over the past week’s sessions for many reasons, including the arrest, the fall of the Russian airliner, and the fluctuating exchange rate.
Rashad explained that announcing the freezing of the businessmen’s assets before the court cancelled the Prosecutor General’s decision led to the fall of the market. “It could have been better if freezing assets came without details to avoid all the aftermath,” he said.