22 NORTH AFRICA

A dream de­ferred

The Africa Report - - CONTENTS - By So­phie An­muth in Cairo, Med Dhia Ham­mami and Nizar Manek in Tu­nis, and Ni­cholas Nor­brook

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.

BUY­ING IM­MU­NITY

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

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