Egypt Index Drops Most in 3 Months on OCI Tax Probe EscalationAhmed A. Namatalla
Egypt’s benchmark stock index tumbled the most in three months after the government escalated a dispute with Orascom Construction Industries over taxes dating back to 2007.
Shares of Orascom Construction, Egypt’s biggest publicly traded company known as OCI, dropped 2.7 percent, the most since Dec. 6, after Egypt’s public prosecutor placed Chief Executive Officer Nassef Sawiris on an arrivals watch list. Twenty-seven shares fell on the EGX 30 Index, which decreased 2.3 percent to 5,375.12 at the close in Cairo, the lowest since Dec. 26.
OCI shares fell to 252.09 pounds after Nassef and his father Onsi, a former OCI chairman, were put on a travel ban before the start of a probe into Finance Ministry allegations they were involved in tax evasion. The nation’s markets regulator also issued more-stringent rules on local companies’ global depositary receipts, triggering speculation the rules are aimed at OCI, which comprises a quarter of the main index.
“What happened with OCI triggered a selling wave,” Ramy El Agamy, Cairo-based institutional sales manager at NBK Capital Securities Egypt, said by phone. “It’s the travel ban and the new regulations that leave the door open to the possibility that they could be applied retroactively. Add to this the political instability and macroeconomic picture and you’ll see investors have a cause for concern.”
OCI is accused of owing 14 billion pounds ($2.1 billion) in taxes on the 68 billion pounds of profit it made from the 2007 sale of its cement business to France’s Lafarge SA, the state-run Middle East News Agency reported today, citing Mamdouh Omar, head of the Egyptian Tax Authority. The company said today it hasn’t been notified that it owes taxes beyond a claim from the authority for 4.7 billion pounds in taxes related to the sale.
Egypt’s regulator said yesterday that local companies with shares listed abroad as GDRs can’t allow those shares to exceed 30 percent of their respective capitals. OCI, which is seeking regulatory approval to transfer its Cairo-listed stock to Amsterdam via a share swap or cash offer, had stock equivalent to more than three quarters of its capital listed in London before transferring it to NYSE Euronext Amsterdam.
Orascom Telecom Media & Technology Holding SAE, the company controlled by Egyptian billionaire Naguib Sawiris, advanced 2.9 percent to 71 piasters. The shares are up 13 percent in two days since the board recommended a 1.35 billion-pound dividend distribution, or 26 piasters a share according to data compiled by Bloomberg.