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Egypt Millionaires ‘Sacrificed’ as Army Tightens Grip

Egypt Protesters, Mubarak Supporters Clash in Cairo
An Egyptian police helicopter flies over demonstrators calling for the ouster of Egyptian President Hosni Mubarak during a protest in Cairo. Photographer: Mohammed Abed/AFP/Getty Images

Egypt’s uprising may ring the political death knell for a group of millionaires who helped shape the government during the past six years and now find themselves under investigation.

Ahmed El Maghraby, a property developer and hotelier, and Ahmed Ezz, chairman of Ezz Steel, Egypt’s biggest producer of the metal, were among the businessmen ousted from cabinet and ruling party positions after President Hosni Mubarak turned to former military men for top posts as he clings to power.

Mubarak “ordered that businessmen be removed from the government,” Prime Minister Ahmed Shafik, a former air force commander, told state television this week. “The involvement of businessmen in public service wasn’t 100 percent positive.”

The government of premier Ahmed Nazif, which Mubarak fired last week, had attracted record foreign investment, helping the economy expand at the fastest pace in at least two decades. At the same time, political opponents said some local executives used their links with Mubarak to further their own interest.

Egypt’s public prosecutor, Abdel-Meguid Mahmoud, today banned El Maghraby and Ezz, along with former Tourism Minister Zoheir Garranah, from travel and had their bank accounts frozen, the state-run Middle East News Agency reported today along with state television, citing Mahmoud.

Public Inquiry

The prosecutor’s office was investigating claims of “public funds embezzlement” against the former officials and took the decision to ban them from travel “in light of the current circumstances,” Mahmoud told the agency.

El Maghraby ran business interests in property and hotel industries before becoming housing minister, while Garranah managed a tourism-related company.

All the former officials have publicly and repeatedly denied any conflict of interest. Garranah and El Maghraby couldn’t be reached for comment on their mobile phones today when called by Bloomberg News, and neither could Kamel Galal, head of investor relations at Ezz Steel.

Egyptian billionaire Naguib Sawiris described members of the previous cabinet as a “scapegoat” for Mubarak. “They were sacrificed,” he said by telephone Jan. 31.

Former Trade Minister Rachid Mohamed Rachid, a former Unilever Plc executive, said on Jan. 30 that he chose not to join the new government. His name wasn’t included in the prosecutor’s statement reported on state media.

Poverty Gap

About 18 percent of Egyptians live below the poverty level, with the rate rising to 40 percent in rural areas, according to World Bank data. Headline inflation in urban areas, the rate that the central bank monitors, picked up to 10.3 percent in December from 10.2 percent the previous month.

“The main problem in Egypt is the distribution of the wealth,” said Hani El-Husseini, a member of the economic secretariat of the Tagammu opposition party. “Most of the wealth is concentrated within the upper class of businessmen,” he said by telephone in Cairo.

Shafik was appointed prime minister after former army officer Omar Suleiman, who has run Egypt’s intelligence service since 1993, was named vice-president by Mubarak on Jan. 29. Mubarak said he will step down this year after protests that left more than 100 people dead. Protesters rejected the offer and demanded he go now.

Placating Citizens

The new cabinet may seek to placate the public by increasing social spending, reversing the policy of the ousted government, which had planned to remove energy subsidies by 2014. Finance Minister Samir Radwan told state-run television this week that the ministry will pay unemployment benefits to people who lost their jobs during the unrest.

The policies may lead to the widening of Egypt’s budget deficit to “double digits” in 2011, Standard & Poor’s said in a Jan. 31 report. Egypt’s budget gap was 8.1 percent of gross domestic product in the fiscal year that ended in June.

During its tenure, the Nazif cabinet accelerated the sale of state assets. Economic growth, which was 3 percent in 2003, picked up to an average of 7 percent in the three fiscal years to June 2008 before the global financial crisis set in. The country needs that growth level to create enough jobs to meet the increasing in the working population.

The economy in the country of 80 million people, the most populous in the Arab region, probably grew an annual 6.2 percent in the last quarter of 2010, compared with 5.5 percent in the previous three months.

“The Egypt that became known to the world was a privileged elite that did not represent society at large,” John Sfakianakis, the Riyadh-based chief economist at Banque Saudi Fransi, said by telephone.

Download: Gregory Says Egypt Having 'Limited' Effect on FX


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