New 3rd-party proposal to modernize Egyptian Iron & Steel Company could divert liquidation plans

An offer from a Ukrainian firm to modernize and operate Egyptian Iron and Steel Company could reverse liquidation plans that have placed the jobs of 7,000 Egyptian workers at risk, the Public Enterprise Minister Hisham Tawfik said this week.

Protests against the closure of Iron and Steel, once the pride of Egypt’s burgeoning post-independence industrial sector, have erupted multiple times since the January decision to liquidate the company. In the latest incident, 10 workers were detained for two hours after a spontaneous sit-in held by employees after the company’s final furnace was suddenly extinguished in May.

An official offer from the Ukrainian government-owned Vazhmash company to rehabilitate and develop Iron and Steel’s Helwan plant via a profit-sharing scheme with the Egyptian government has been submitted and is currently under review, said the Metallurgical Industries Holding Company, the state-owned parent company of Egyptian Iron and Steel, in a letter to the Egyptian Exchange on Tuesday.

Confirmation of the proposal’s submission came after the public enterprise minister told the press on Monday that a “serious” offer had been made by a Ukrainian company to develop and operate Egyptian Iron and Steel.

“There is a possibility that Egyptian Iron and Steel could be recalled from liquidation — just as El Nasr Automotive Manufacturing Company was recalled to service seven years after a decision was made to liquidate it — if the Ukrainian offer is viewed positively and includes serious technical and financial guarantees,” said Tawfik.

For Mohsen Bahnasy, one of the lawyers representing workers and several shareholders in an ongoing lawsuit challenging the liquidation decision, the Ukrainian offer also supports the view that the liquidation decision was rushed through despite other alternatives being available, adding that this could strengthen the plaintiffs’ case.

According to the official offer, a copy of which Mada Masr obtained, the Ukrainian company’s proposal consists of a 36-month modernization plan aiming to increase the plant’s production capacity to 1.2 million tons under the Ukrainian company’s leadership, followed by a 20-year period during which the company would be jointly managed via a partnership between Vazhmash and the Metallurgical Industries Holding Company.

In exchange for financing the required investment, Vazhmash proposed a profit-sharing scheme whereby it would take 90 percent of the profits while the holding company would take the remaining 10 percent.

Yet, Vazhmash has conditioned its offer on Egyptian Iron and Steel’s slate being wiped clean of debts, which the Public Enterprise Ministry has said stand at LE10 billion, with Vazhmash proposing that the holding company pay off any outstanding dues before the deal is finalized.

The offer also pledges to keep 4,000 out of the current 7,000 workers on the payroll, with spending on each worker to average US$500 dollars per month including salaries and other benefits, such as health insurance. The fate of the company’s other 3,000 workers is unclear.

Vazhmash’s offer comes three weeks after the last operating furnace of Egyptian Iron and Steel Company was shut down and an official party appointed to manage its liquidation. Instructions issued in May also forbade company bus drivers from transporting workers to the Helwan plant.

Negotiations between the state and the company’s trade union committee about the severance package of the company’s workforce are still ongoing, with over 7,000 peoples’ monthly payments, end-of-service compensation, and health insurance benefits at stake.

An official from the General Union of Engineering, Metal and Electrical Workers, the parent union for workers in the sector, told Mada Masr on Tuesday that the union has reached a preliminary agreement with Manpower Minister Mohamed Saafan, who is acting as a mediator for the union in talks with the Public Enterprise Ministry. The agreement is now pending a response from the public enterprise minister.

In May, after negotiations between the Public Enterprise Ministry and the parent union, workers were offered a minimum rate of compensation of LE250,000, just LE25,000 more than an initial LE225,000 offered by the ministry, which capped the maximum compensation rate at LE450,000. A company trade union committee member told Mada Masr at the time that the workers had refused the offer.

As it stood in May, the agreement would have seen an exceptional monthly allowance paid to people who have worked at the company for over 25 years, at a rate of LE1,200 per month until they reach the age of 60, after which they would be paid a pension. The trade union committee initially demanded a rate of LE2,000. The source from the committee said in May that they were still negotiating over whether workers would receive health insurance.

The Ukrainian company’s intervention follows a series of attempts to modernize the company and pay off its debts led by workers and their representatives on the company board. The holding company said that members of the company board who opposed the liquidation decision had “resigned'' in October, leaving the holding company to reformulate the board and approve a decision to separate Egyptian Iron and Steel Company’s mining and quarrying facilities off into a new company, in a meeting that the workers sought to stop in a lawsuit at the time.