Breakfast Wrap: Labour Union Win Hits Centamin, A New Leftist Salafi Economic View

The power of North Africa’s union movement was partially felt yesterday after an Egyptian court said Gold producer Centamin’s right to operate the Sukari mine, its main asset, was invalid

The London-listed stock saw more than a third of its stockmarket value wiped out on Tuesday before trading was suspended.

Centamin later said that operations were continuing and that the Egyptian administrative court did not have jurisidiction over its mining rights, Reuters reported.  The ruling came a day after it hosted a site visited for analysts.

But the damage has been done and Centamin looks likely to be the latest company to join a long list that are being challenged by Egypt’s court.

Centamin has been subject to successive strikes over the last two years as workers demand better pay and re-instatement of laid off workers.  Two strikes this year alone affected production at the goldmine.

According to the FT, the case against Centamin has been brought by Hamdy al-Fakharany, “an engineer who rose to fame a few years ago after he mounted a successful legal challenge against the country’s largest real estate developer over the price of land it had bought from the state to build a new suburb.”

As Rebel Economy has pointed out before, the emboldened labour union movement, though positive for countries such as Tunisia and Egypt, could also be seen as a double-edged sword.  It only adds to investor worries at a time when government’s are trying to revive confidence in the economy.  

This ruling is likely to be appealed against in a higher court, but as Reuters reports “based on cases involving other Mubarak-era contracts, this court decision may herald a tortuous legal wrangle that could take many months or longer to resolve.”

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Meanwhile, more company controversy for Egypt.

Dana Gas, the United Arab Emirates’ largest listed natural gas firm, hit by payment delays from Egypt and Iraq’s Kurdistan region, will not repay a $920 million convertible Islamic bond, or sukuk, when it matures today, Reuters reported.

That means it is set to become the first UAE company to fail to pay an Islamic bond on maturity, which can only point to the fragility of Sharia-compliant financing versus conventional financing.  If a default can happen in both cases, why bother trying to disguise it as permissive under Islamic law? Just because it makes you feel better?

Dana will have some time to work out a deal with bondholders, the Reuters story said, but the key issue is here:

Although indebted firms in the Gulf Arab state have extended maturities on billions of dollars in bank loans since the onset of the financial crisis in 2008-09, no sukuk have been restructured or unpaid on maturity.

So this could be a first for Abu Dhabi, that unfortunately has proved to be notoriously difficult in countries such as Saudi Arabia and Kuwait.

That’s not the only problem Dana has to deal with.  It has been unfortunate enough to be one of a long list of companies to have problems getting paid for exploration in Egypt from the state-run oil company.  Dana was owed $198.5 million by Egypt as of June 30, according to its half-year results. The company received $117.3 million from Egypt during the first six months of the year.

This, along with similar issues in Iraq’s Kurdistan region, has contributed to Dana’s financial woes today.

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Final bit of company news.

Orascom Telecom Holding sent out a statement yesterday saying it was considering the sale of all or part of its interests in central and southern Africa as part of a review of operations in the region.

Russia’s Vimpelcom took control of the Egyptian company last year in a deal worth around $6 billion.

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An interesting read in the Atlantic’s EgyptSource blog about the various economic ideologies of Islamist parties, and the subtle dynamics between the parties.

“The recent establishment of a new Salafi political party, al-Sha’ab (the People’s Party), which espouses a novel blend of economic populism and religious fundamentalism, reflects increasing diversity in the economic ideologies of Islamist parties,” writes Mara Revkin in EgyptSource.

Al-Sha’ab, which is apparently Left-leaning, has not yet released an official platform, Revkin writes, but “party officials have sketched out vague proposals for a vast social safety net that is a striking departure from the pro-market economic policies historically associated with the Brotherhood and other moderate Islamist groups.”

For instance, while the Brotherhood said it would focus on “social justice” and “bread”, it has increasingly turned back to the economic policies that were used under the Mubarak regime.

One surprising convergence between the economic policies of the Brotherhood and Salafis is “in their increasingly hostile approach to organized labor,” she writes. 

Here’s what happened:

In recent weeks, Brotherhood leaders have cracked down on workers’ strikes. On October 26, former FJP MP Sobhi Saleh told a crowd in Alexandria’s Ramla Square that those who participate in strikes and sit-ins are “enemies of the people.” Salafi Sheikh Ahmed Mahalawy echoed the same sentiment in a sermon for Eid al-Adha, where he urged President Morsi to stop “pampering the people” and take a stand against strikes.

Now labour movements don’t do a good job of helping the economy with their strikes, but a dialogue must be opened up so that we don’t get a case of Centamin.

 

How about introducing some shared-wins, like better shift hours, health care benefits or family benefits?

A Leftist Salafi Political Party sounds very much like an oxymoron, but actually this party is exploiting the weakness in the Brotherhood’s Freedom and Justice Party and Salafi Al Nour, where objectives that once seemed plausible are now being ignored in favour of the easier economic framework that was already put in place by the former regime.

The turnaround in the thinking on the IMF loan, for instance, fits in with Revkin’s thesis.  Islamist parties were fully against the loan until just a few months ago, but are now calling it Sharia-compliant.  The problem is, the loan structure has not changed and it still has about a 1.1% interest rate, which is a forgiving rate but still not sharia-compliant.

Are these Islamist parties attempting to convince voters the loan is structured in a way that is permissive under Islamic law, when it is not the case?

Are these Islamists discovering that it is hard to blend religious beliefs with a modern economic framework and back-tracking on past announcements?

Rebel Economy’s answer would be yes.




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