Liquidating a public company: A brief story of corruption in Egypt

The general assembly of the Egyptian National Navigation Company (NNC) decided last month to liquidate the company. According to the resolution text, the accumulated losses of the company (about EGP 1 billion, $63.5 million) are the main reason for the liquidation. However, according to different observers, the liquidation of the old company was not inevitable, but rather came within deliberate government policies that began during the era of the ousted president Hosni Mubarak and are still continuing under the mandate of Abdel Fattah al-Sisi.

A deep-rooted history
NNC has been operating for nearly 150 years. Its activities are not limited to international maritime transport, but rather extend to sale and rental of all types of ships, and maritime transport missions, in addition to marine and tourism by proxy of all kinds. The company used to transport wheat, petroleum, and weapons, and it also expanded to work with more than one shipping line, the most important of which is the Mediterranean and Red Sea Line, the North Line and the Adriatic Line. One of the company’s most popular activities is transporting military stocks during the Gulf War and returning Egyptians from Iraq during the war. Now, the company employs approximately 393 workers in various disciplines. The company itself owns 90 per cent of the shares, while the Holding Company of Maritime & Land Transport (HCMLT)) owns eight per cent, and Alexandria Container & Cargo Handling Company owns two per cent.

Intentional loss of the company
Samar Sami, the legal representative of the company’s trade union committee, told Mada Masr that the neglect and liquidation plan was carefully drawn up since the end of the 1990s (during the era of President Mubarak), specifically in 1997, when HCMLT acquired the assets of the company at its nominal value, which was much less than its actual market value. Sami added that what proves that the NNC’s successive administrations intentionally inflicted the loss on it is a number of practices, such as not updating the fleet owned by the company since 2000, which is the date of the last modern ship that entered the company’s fleet. She also drew attention to the fact that the lifetime of the ship in the navigation market is about five years, and after that it should be replaced by the latest models or go through a process of maintenance and replacement of parts for it to operate at full capacity. According to MP Haitham al-Hariri, who has questioned the government in the past two months about the company, the losses the company has achieved are deliberate. He described the matter as “intended corruption to end to the liquidation of the company,” pointing out that the company’s administrations neglected the fleet owned by NNC and the ships were not maintained, modernised, or restructured, which led to the accumulation of losses and the number of ships owned by the company diminished day after day. Hariri added, verifying the authenticity of his intervention, that one of the ships owned by the company, named Marsa Alam, broke down in a Sudanese port in April 2018 and the port addressed NNC to repair and withdraw it from the port since it is disturbing the traffic of ships. But the company’s board did not move until October 2019, which cost it around $500,000 in fines for the delay. These accusations were confirmed by the former head of NNC, General Nabil Lotfi, who said, in press statements in 2015, that “the former heads [of the company] got rid of the ships by selling them under the replacement and renewal clause as broken ships or operating ones to other companies. The reality indicates that there was no replacement nor renewal of the company’s ships, and the company became overburdened with debt, to the extent that one of the creditors seized the company’s cars, so the company had to rent cars to cover its needs.” Lotfi was forced to resign from his position after seeking the help of all officials in the state, starting with the president of HCMLT and ending with the president of the republic himself, but none has been considered. These policies have resulted in a significant deterioration in the size of the company’s assets over the past decades. The company used to own 70 ships that were shrinking during the 1990s to become only 18 by 2002, while the current number of the ships before the liquidation resolution was seven ships, of which only two operate and the other five are completely worn out.

A deliberate intention to liquidate
According to a study prepared by one of the consulting firms that the company hired to study the situation and restructure its work system, the general assembly’s decision regarding liquidation comes in violation of three previous decisions of the company’s extraordinary general assembly regarding executive decisions to restructure the company. In his intervention, Hariri mentioned that the company used the Economic Group for Financial Advisors (EGFA) in 2015 to conduct a study on its situation and the best possible solutions to save the company structurally and financially. Hariri also clarified that the study ended in a complete rejection of the liquidation proposal due to several reasons, the most important of which is the possibility of the company continuing according to the feasibility study prepared by EGFA, the high cost of early pension financing for employees of the company, and the loss of another navigation arm for the Egyptian state. The study presented more than one vision and option for the continuation of the company, including selling a number of decrepit ships and buying two used ones to restore the work. The al-Sisi regime did not take any serious steps to reform the company, and it appears that there was a deliberate intention to liquidate it, which ultimately led to Egypt losing one of its long-standing marine companies.