22 NORTH AFRICA
A dream deferred
As the old cronies re-emerge, is burying the hatchet the way to get economies moving?
It is early May, and southern Tunisia is restless. Students are on hunger strike in Gabès and Jbeniana. Angry and unemployed youth in Métlaoui have shut down a major phosphate plant. Four years after the revolution, frustrations are rising. Alongside his counterpart in Egypt, former general Abdel Fattah al-sisi, Tunisia’s President Béji Essebsi has to square a circle: the economy desperately needs big business to step up investment – even if some of those businesses are run by the same people who got these countries into their current impasse. Forget what Fox News tells you: North Africa’s primary problem is not terrorism. For decades a tight-knit network of political and business interests choked the economies of the region. This grasping elite was myopic, creating fertile ground for political Islam that helped to radicalise a generation of jobless students. This was a key part of the popular revolts from 2011 onwards in Tunisia, Egypt, Libya and Morocco. Four years later, Ahmed Ezz, perhaps the most notorious of the Mubarak-era business cronies accused of corruption, is out
How to deal with fat cats – not fatwas – is the real problem facing North African leaders after the revolutions failed to fix old economic problems. The clock is ticking for governments to deliver justice and jobs
of jail and campaigning to become a member of parliament. In Tunisia, investigations into previous wrongdoing have faltered if not stopped. President Essebsi told an audience in March: “As much as we affirm reconciliation, we need to be careful not to turn to a vigilante transitional justice.” How deep do these politico-business networks run? Did anything change during the brief Islamist interregnum before the military counter-revolution in Egypt and Tunisia’s own ditching of Islamist party Ennahda? Have these deeply embedded networks survived, and might they ignite a fresh Arab Spring? The answer, of course, depends on where you look. North African countries each have their own rich, unique history, forged by centuries of Islamic conquest spreading west ward from mecca up through to northern Spain, followed by differing episodes of push-back against European colonial oppression and their own post-colonial trajectories. But they also have clear similarities, which may resonate below the Sahara too: high inequality, crony capitalism, a tech-savvy youth bulge, heavy-handed security states and radical Islam.
RICH GET RICHER
Inequality across North Africa by 2010 was unsustainable. An issue of Forbes notes that the five wealthiest people in Egypt come from just two families. Between them, the Sawiris and Mansour brothers are worth $17bn – or more than 6% of the country’s gross domestic product (GDP). In Tunisia, a World Bank paper shows how just 114 individuals, all linked to the ruling family of President Zine el Abidine Ben Ali, owned assets worth $13bn – a quarter of the country’s GDP. Recent data from Swissleaks showed that Morocco’s royal family held HSBC Switzerland accounts holding more than $9m, while Muammar Gaddafi’s wealth allowed him to pay millions of dollars to bring stars like Beyoncé and Nelly Furtado for private gigs. Crony capitalists monopolised the economies in the region, and businessmen packed the benches of the ruling National Democratic Party in Egypt under President Hosni Mubarak. “Many big business owners and families gained access to markets, and privatised assets, land, bank credit and even the enforcement of rules and regulations – at the expense of unconnected businesses, consumers and sometimes the state budget,” explains Amr Adly of Cairo University. He adds that by 2007 just 45 factories were receiving 65% of government energy subsidies set aside for industry. Egyptian parliamentary inquires said steel prices were 70% higher than they should have been. In Tunisia, the Ben Ali clan controlled both mobile phone companies, explains Shanta Devarajan, chief economist of the World Bank for North Africa and the Middle East. “And telecoms costs in Tunisia were the third highest in the world, just after Myanmar and Congo-brazzaville.” At the time of the Arab Spring, there were also cohorts of young graduates – part of a growing and educated demographic able to act as a traditional revolutionary vanguard, aided by Facebook and Twitter. And there was political Islam, which radicalised people who suffered at the hands of Western-backed regimes that had been allowed to become ever more heavy-handed in their approach. When Ben Ali and Mubarak fell, politico-business networks were under threat. Ahmedezz’s offices were set alight three times. But these networks were resilient and quickly co-opted the new post-revolution governments.
When Ennahda ruled in Tunisia and the Muslim Brotherhood in Egypt, corruption did not cease. Rather, it got worse in Tunisia, according to businessman Walid Loukil. In Egypt, the army secured itself immunity from prosecution in the new constitution, while President Mohamed Morsi’s son was appointed to a government position alongside several other members of the Morsi clan. Christoph Wilcke, head of Transparency International for the Middle East and North Africa, said of a decision to lift a travel ban on Mubarak’s sons: “If money can buy immunity from prosecution, then justice will not only be bought and sold but become the property of the rich.” According to crusading journalist Wael Ghonim, the Muslim Brotherhood did everything it could to reconcile with top business interests in Egypt, even with well-known Mubarak cronies such as Hussein Salem, Rachid Mohamed Rachid, Yasseen Mansour and Ahmed Al-maghrabi. The government also set many of Mubarak’s key lieutenants free. “In fact, the new [muslim brotherhood] regime adopts policies that raise suspicions about conflict of interest, such as accusations against the minister of trade and industry for monopolising the dairy market,” wrote Ghonim at the time. He also pointed out the Muslim Brotherhood’s volte face regarding a joint economic manufacturing zone with Israel. Ultimately, the Islamists’ lack of political nous was their undoing. But while in Tunisia and Egypt Islamists may have been co-opted into corruption, successive Moroccan kings have a track record in co-opting Islamists into mainstream politics. This is partly because the Moroccan monarch is considered a religious leader – Al Amir al Moumin or commander of the faithful.
After the Mouvement du 20 Février rattled the regime into producing a new constitution in 2011, the Islamist Parti de la Justice et du Développement won parliamentary elections that same year. But the palace has played the Islamists skilfully. King Mohammed vi asked them to push through important reforms on pensions and removing energy subsidies. Had there been a popular backlash, the palace could blame the Islamists. But because it succeeded, Mohammed VI looked like a progressive statesman. When the Islamists came to power in Tunisia and Egypt, the various elite business and political leaders successful during the Ben Ali and Mubarak eras mostly put their heads down. And when transitional governments and ruling Islamist parties found it hard to run the economy without them, it paved the way for their return. Corruption trials and commissions mushroomed in 2011, but most are now forgotten. In Egypt, many businessmen have announced their renewed political ambitions in lists that look similar to those before 2011. They may be members of old families that have always been in business and politics, the ‘ bashas’ or Mubarak’s cronies. For example, the Abazas, a family that is involved in businesses from cars to real estate, is linked to the Wafd Party. The Wafd Party, which is nearly a century old, was once in the opposition and now relies on its old glory and on the money of businessmen like El-sayed El-badawi, who owns several media outlets. In Tunisia, Samia Abbou, a Courant Démocratique parliamentarian, says it is clear that the governing Nidaa Tounès party has already “cut a deal” with businessmen close to the Ben Ali regime who helped finance his election campaign in 2014. In February 2012, Tunisia adopted a law that excluded assets acquired by inheritance from confiscation. This meant the family of Marouane Mabrouk – who married Ben Ali’s daughter Cyrine and became exceptionally wealthy through accumulating monopolistic positions in strategic sectors in the economy – could keep their 38% stake in Banque Interna- tionale Arabe de Tunisie. They say they bought shares between 2006 and 2008 thanks to an inheritance from their father. The Tunisian administration “defends people involved in corruption,” says Faouzia Bacha, a lawyer at the Cour de Cassation, Tunisia’s highest court, who has a record of denouncing financial and administrative corruption in the oil and gas sector. Bacha cites passages in reports by a commission on corruption headed by Abdelfattah Amor. Onedetails corruption in Tunisia’s banks during the tenure as central bank governor of Mustapha Kamelnabli. “Theworst is that nobody has been tried. Some have even been promoted,” she explains. But President Essebsi is more pragmatic, saying that witch hunts would be counterproductive. Calling for national reconciliation, he told our sister publication Jeune Afrique: “Many who feel like they could face court proceedings have their hands tied, whereas they could be investing and giving fresh impetus to our economy.” Some wrongdoers are still being pursued. On12 May, a Tunis court refused bail for Slim Chiboub, husband of Ben Ali’s daughter Dorsaf. While revolutionary justice has perhaps not been served, the economic imperatives for the post-islamist governments in Tunisia and Egypt remain clear. The attack on the Bardo Museum in Tunisia has damaged the key tourism sector, while President Sisi admits that he cannot rely on Gulf countries to continue to pledge billions of dollars in aid.
OLD NAMES, FRESH IMPETUS
They might look toward their neighbour to the west. While not immune to charges of crony capitalism – the Mouvement du 20 Février singled out royal adviser Fouad El Himma and businessman Mounir Majidi for criticism – the Moroccan government has done the most since 2000 to create jobs, as well as a host of ancillary benefits for poor people, such as better public transport and inexpensive housing. The protests targeted corruption in the regime, but stopped short of calling for Mohammed VI to go. The result was relatively smooth constitutional change.
REAL INDUSTRIAL POLICIES
Industrial policy in Morocco has been aimed at nudging the economy towards manufacturing – including investment in the Tangier-med port project, courting of international carmakers and auto-part supply chains, with similar efforts put into electronics, aeronautics, agriculture and textiles. In Egypt and Tunisia, those industrial policies ended up being subsidies channelled into the pockets of cronies. On top of that, says the World Bank’s Devarajan, Egypt’s energy subsidies boosted energy-intensive industries that create few jobs. “So you are giving a subsidy to large, old, capital-intensive firms at the expense of young, dynamic and small labour-intensive firms,” he says. Egypt’s new military administration appears to have got the message. First, it has closed the taps on energy subsidies. Second, while it has grabbed a large share of the new contracts, the military has also taken on a nation-building and developmental role, especially in ggrand infrastructure projects llike the $8bn new Suez canal pproject. In addition, a number oof small Egyptian companies – rrather than big business – have wwon contracts to do much of tthe army’s new road and tunnnel projects. The cutting of subsidies, due in part to the fiscal crisis and in part to adesire to restructure the relationship between government and big business, could force old business empires into a brave newworld of independence. “It might actually translate into some kind of an independent political role for companies in the future”, says Cairo University’s Adly. Is this a clear departure then from the bad old Mubarak era? Some are not so sure. The Egyptian Centre for Economic and Social Rights has already filed a challenge at the constitutional court against Law 32/2014, saying it protects state contracts from investigation and allows them to be awarded without competitive bidding. That is a recipe for the corruption that sunk the economy last time. The government is acting quickly and without oversight. It has passed at least 300 decrees, and elections have been postponed, again. “It definitely bears the risk of leading to a new era of crony capitalism,” says Adly. Others see problems elsewhere. A prominent Cairo businessperson who declined to be named says: “I am not concerned about corruption, given what I know and what I see. It’s minimal. The problem is not about corruption, but about government ability. When [gamal] Nasser came into power, Egypt was 15 million people. It had a well-structured government. It had a wealth of bureaucrats relative to the population. Today, Egypt is 95 million people, and the government sector has lost a lot of talent.” It seems Sisi has made up his mind about the necessity of the private sector, through which major investment will have to be channelled in the long term. Lawyer Andrew Schoorlemmer of Allen & Overy represented Egypt’s OCI Nvin its recent spin-off of Orascom Construction. “They know they need to rebuild the country in every way, and the only way that’s going to happen is
by involving the private sector.” This represents the re-engagement of the Sawiris clan with the Egyptian economy after it rolled back many of its plans under the Muslim Brotherhood government. But beyond the need to have the private sector engine running as well as government, there are clear messages about the limits of industrial policy without very serious administrative rigour. Tunisia had attempted to do what Morocco is now doing in the electronics and aeronautics sectors before political and business links fatally fused. Could Morocco go the same way? The royal palace is responding to concerns that it has mixed up its private holdings with the public purse and is starting to restructure the vast black box of royal assets known as the Société Nationale d’investissement (SNI). “The King wants to turn it into an investment bank rather than a holding company,” says a member of the sni board who requests anonymity.
REBRANDING THE ROYAL BOX
Maybe the continent’s leaders are getting the message. Devarajan says the World Bank paper on Ben Ali’s grip of Tunisia is in demand amongst civil society groups and academics. “[Explaining the bank’s methods] is a much better way of getting pressure [rather than] the World Bank coming in and saying to some of these long-standing monarchs, ‘We are going to do a study of crony capitalism in your country.’” What hope then for Algeria? It is the one country in North Africa that did not see a serious uprising, possibly because the burdens of the civil war in the 1990s had dampened revolutionary fervour. But perhaps the signs for future troubles are there. Trials relating to over-inflated contracts for the East-west highway have captured the public’s attention, airing links between big business and politicians. Algiers has long played the game that Ali Kadri, an economist with the UN in Beirut, calls “consent by clientelism”. It involves trying to buy off the public with unnecessary civil service jobs. President Abdelaziz Bouteflika’s government cannot do it for ever and is burning through its reserves – topping $200bn at end 2013, they plunged to $120bn by early 2015. Recent events in Burkina Faso, Nigeria and Burundi show that leaders can hold on for a long time when faced with calls for fairer political and economic systems, but they cannot stay on forever.
In Egypt, Sisi is nation-building with the new Suez Canal project
King Mohammed VI has skilfully played the Islamists in government to push through reforms