Production implies industry, and industry refers to the
thousands of factories in Egypt, all of which have suffered in one way
or another as a result of an economic slowdown, a mounting funding
crisis on the national level, diminished foreign reserves and feeble
capital inflows.
The dynamic only exacerbates already existing problems
in the country’s industrial sector, incurring further discontent among
workers. These sector-specific troubles are reflective of, and further
compounded by, broader economic turmoil.
Since the January 2011 uprising, at least 4,500
factories have been shut down, with hundreds of thousands of workers
laid off, according to a study conducted by a labor rights group in
February.
As Egypt’s dire economic conditions worsen, further closures and layoffs are expected.
The study by the Center for Trade Union and Workers’
Services, or CTUWS, an independent NGO, was conducted in 74 industrial
zones across the country. In terms of the effect on joblessness, the
findings appear to correspond with official statistics compiled by the
Central Agency for Public Mobilization and Statistics.
The agency’s statistics indicate that Egypt’s
unemployment rate has risen to a record 13 percent, roughly 3.5 million
people from a total workforce of some 27 million.
Adel Zakariya of CTUWS says hundreds of thousands of
workers have been rendered jobless since the onset of the revolution.
While an exact number is tough to determine, he says the mass of layoffs
is “unprecedented.”
“The exact number of sacked workers is difficult to
gauge at any given point of time. For example, we find that sacked
workers from a certain food-processing company may relocate to another
such company within the same industrial zone in which they worked,” he
says. “A lack of employment contracts and masked or seasonal
unemployment make it nearly impossible to assess the exact numbers of
unemployed workers.”
More closures, not less
Nearly all factories that have been shut down since the
revolution are private-sector companies, Zakariya says. “We’ve witnessed
partial company closures, including the closures of some factories and
production lines within these companies, along with total company
closures.”
While he recognizes that there were hundreds of factory
closures during former President Hosni Mubarak’s rule, the “rate has
increased exponentially since the revolution.”
The 4,500 factory closures cited in the study is not
comprehensive; it is a result of the number of factories surveyed in
industrial zones that the CTUWS has been monitoring. The actual sum,
Zakariya predicts, is likely significantly higher.
“Numerous different industries have been hit by these
closures. Perhaps the hardest-hit industry is textiles,” he says, though
“the textile industry has been in a steady state of decline since
Mubarak.”
A combination of mismanagement, corruption and
indebtedness of public-sector textile companies led to broad
privatization measures in the early 1990s. Dozens of these companies
slashed the workforce they inherited from the public sector, and, after
their privatization, appear to have been similarly mismanaged.
The Cairo Administrative Court nullified some
privatization contracts over the past two years, leaving companies such
as Indorama Shebin Textile, Nile Cotton Ginning, and Tanta Flax and Oils
in limbo, as the state has declined to re-nationalize them.
The steady decline of Egypt’s cotton industry also
prompted the import of lower-grade cotton, leading to a deterioration in
the quality of domestically manufactured textiles. In turn, hundreds of
thousands of textile workers have been rendered jobless, while more
recent economic factors threaten to further increase unemployment rates.
The textile industry has suffered most in the
private-sector industrial zones of Sadat City and 10th of Ramadan City,
while metallurgical industries have been impacted most in Obour City.
Financial obstacles
The surge in the number of factory closures is
attributed to factors that have impinged on the economy at large.
Zakariya cites “difficulties in procuring financing and bank loans,
which have in turn negatively affected production and exports, along
with some capital flight from Egypt amid the climate of political
instability in the country since the revolution.”
Industry insiders and bankers have cited a shortage of
dollars with a depreciating pound and scarce foreign reserves as reasons
for the banking sector’s increasing hesitancy in providing funding and
lines of credit. This affects the ability of ailing companies and
factories to obtain rescue loans or financial support, and also stymies
the import-export flow of goods.
Zakariya admits that financial problems may be
compounded by workers’ strikes and industrial actions. “But although
strikes do negatively affect production, these industrial actions are at
the bottom of the list of factors leading to factory closures,” he
says.
A statement issued last month by Finance Minister Morsy
Hegazy said Egypt incurs losses of about LE100 million per day due to
labor strikes and political unrest.
One private-sector company with a number of factories
blames industrial action for its problems, and last month its owner took
drastic measures to make his point heard.
Farag Amer, chairman of the Faragello Food Industries
Company board of directors, wrote a widely circulated statement in late
February accusing President Mohamed Morsy’s regime of failing to respond
to what he called “blackmail and the moral deviance” of workers, who
launched “unwarranted strikes in contravention to the provisions of
law.”
On 20 February, Amer imposed a lockout, and shut down
his factories across the country following industrial action by workers
in Alexandria.
The Faragello administrative board ordered the sacking
of 27 striking workers, including 17 union leaders, according to workers
and independent union organizers.
A senior administrator from the Faragello company, who
spoke on condition of anonymity, tells Egypt Independent, “We’re back to
operations as usual. All our companies and factories across the country
have returned to work.
“We had shut down operations for only a few days in
light of the illogical demands raised by newly employed workers, calling
for unrealistic bonuses and pay raises,” he says, but did not comment
on the dismissal of unionists and striking workers from the company.
But Zakariya says political as well as financial factors
motivated the temporary closure. While it’s not clear what the company
owners’ affiliations are, they appear to be seeking Morsy’s intervention
in dealing with striking workers and independent unionism in their
company.
“Faragello’s administration is involved in a game of
political maneuvers with the new regime ... playing its political
pressure cards with the regime, because they want to eliminate strikes
and independent labor unions,” he claims.
The Faragello administrator went on to say, “We demand
security and stability for our industries, and for the country as a
whole.”
However, he adds, the company may deal with problems such as lack of diesel and fuel to power the factories in the future.
Egypt’s diesel crisis has extended far beyond affecting
drivers and causing winding traffic jams around gas stations. It is now
halting work at some factories, disrupting transportation of school
buses and, more critically, failing to meet the needs of power plants as
the heavy energy-consuming summer months approach.
“Given the national outlook for diesel and fuel
shortages, along with associated electricity blackouts, we are expecting
additional factory closures and even more layoffs. Whether these
closures will be permanent or temporary, partial or complete, we’ll have
to wait and see,” Zakariya says.
Factories in Sadat City and 10th of Ramdan are edging closer toward possible closures due to the diesel crisis, he adds.
Government response
Government officials have attempted to address the
numerous factory closures, while simultaneously proposing plans to
create thousands of new jobs. On 6 March, the Cabinet claimed the
government helped secure 522,000 job opportunities, including 345,000
locally and 177,000 for Egyptians abroad.
In a televised interview 25 February, Morsy said 119 new
factories commenced operations in Egypt that month, with about 300 more
factories in the pipeline. The Finance, Manpower, Investment and Youth
ministries proposed an ambitious plan to jointly create 700,000 new jobs
this year.
However, union organizer Tallal Shokr, board member of
the Egyptian Democratic Labor Congress, is skeptical of these grand
proclamations.
“The government claims that it has secured hundreds of
thousands of job opportunities for Egyptians, and claims that it will
create hundreds of thousands more — these are baseless claims, merely
for media consumption,” Shokr says. “The reality is that unemployment
has reached a record high, and new job opportunities are not being
provided, at least not on the scale that the government is claiming.”
He cited as further setbacks the state’s move toward
cutting public spending in an attempt to rein in the widening deficit,
as well as plans to curb subsidies and a number of expected measures
associated with the US$4.8 billion International Monetary Fund loan
being negotiated.
“In light of current economic conditions, the government
will not be able to provide the 700,000 new jobs that it speaks of. The
best it can do is to provide contracts for those who are already
employed and claim that they have created all these new jobs,” he adds.
*This piece was originally published in Egypt Independent's weekly print edition.
**Photo courtesy of Al-Masry Al-Youm
