After Alef: A bad omen for investment in Egypt

After Alef: A bad omen for investment in Egypt
Comment: In its latest crackdown, Sisi's government has assigned a state-run investment company to run Egypt's chain of beloved Alef bookstores, writes Mohamed ElMeshad.
5 min read
25 Aug, 2017
The Egyptian state's purge is taking in many in its path [AFP]
In Egypt, there was once a time when finding a space where adults or for children could read, or participate in literary and creative activities, was a complicated task. It often involved travel, unless you lived in close proximity to some of Cairo's established literary centres, mostly downtown.

Otherwise, most had to contend themselves with finding books from kiosks on the street or attempting to locate the almost clandestine public libraries. 

Over the past 15 years, a group of trailblazers in the private sector decided to fill this gap, by implementing business models for sustainable book stores that also served as cultural centres literary locales. Suddenly, aspiring bookworms were almost spoiled for choice for places to go, book signings to attend or public lectures to learn from.

Among those trailblazers was Alef Bookstore, which in less than a decade managed to expand from one branch to 37 around the country. Today, Alef has fallen under the government's financial administration. The reason: the committee created to confiscate the holdings of the Muslim Brotherhood have deemed its owners suspicious of being members of the Brotherhood.

This month around 20 companies were placed under financial administration based on similar claims.

How this committee is still finding new businesses to confiscate after four years of this purge is not only perplexing, but worrying for anyone wishing to be involved in any sort of business in Egypt.

In 2013, the assets of all of the leaders of the Muslim Brotherhood in Egypt were frozen. Regardless of the legality or the ethical justification of this move, it was to be expected. In the ruthless and often very dirty game of Middle Eastern politics (or just, "politics"), any wager has very high stakes attached to it.

This month around 20 companies were placed under financial administration based on similar claims.

The leadership of the Muslim Brotherhood chose to try and consolidate their political victories after 2011, and essentially locked the doors to the halls of power with no one but the different security apparatuses to keep them company. The outcome of their naivety was unfortunate - albeit expected - for many including myself.

However, the lengths the state is going to, to try and eradicate any whiff of the Brotherhood on Egypt's streets is continuing to grow beyond anything any observer could have imagined. Besides the political detentions and implementation of draconian measures meant to not only silence, but severely punish even the most well-intentioned, and frankly innocent MB members, the state's purge is taking many others in its path.

It has been transformative, and its effects have been multiplying. Its role in restricting basic human rights is well-known to most, and has been extensively covered. The negative effects on business, however, are constantly swept under the rug.

Egypt's regime is currently pre-occupied with presenting itself as the next great destination for foreign investment. Higher interest rates and a rapidly depreciating currency has indeed played a role in attracting a certain class of investors, lured by the promise of a medium-risk, high-return on some short-term investments.

However, this stands in contrast to Egypt's inability to attract foreign "direct" investment FDI, which is much more capable of producing jobs and long-term rewards, not only for the investor, but for the country.

FDI rates rely profoundly on internal stability, security of investments, transparency of information, upholding of contrasts and infrastructure building.

The continuous persecution of individuals with outstanding records as business owners - even if provisionally - is a direct affront to most of these. Owners of longstanding companies such as Radioshack (Egypt), Mobile Shop, Computer Shop and others suddenly find their companies under the financial administration of public sector entities until the committee deems them to be "innocent" of ties to the MB.

Besides Alef, newspapers such as Daily News Egypt and the economic publication, Borsa were also put under public sector control because of accusations levied against their main shareholder. 

If there was one sure fire way to scare investors from long-term investments in Egypt, this was it

If experience from the past few years is any indication, closed companies do not do well under public administration. In the past, these companies have included massive supermarket chains, furniture shops as well as many others including NGOs, with significant social reach.

In the current context in which Egypt is digging its way out of sluggish economic performance and a financial crisis, placing companies under public administration must be assessed from the outside looking in.

From that perspective: A group of businesses that have been set-up for years, collectively employ thousands, and have been more or less compliant, can without much notice find themselves taken over. If there was one sure fire way to scare investors from long-term investments in Egypt, this was it.

Internally, this is deterring locals from investing their own money into the country. Some of the major, and very visible successful businesses coming under threat, and at times even dismantled due to a paranoid apparatus of a regime obsessed with eliminating perceived threats.

The purge, like those before it, will fail. It will mutate, widening in scope as yet more perceived threats loom, until there is no one left to purge.

As for politically conscious businessmen who have the audacity to try to create politically conscious endeavours based on freedom of expression, diversity and creativity, such as Alef, they will undoubtedly think again. 

Mohamed ElMeshad is a journalist and a PhD candidate at SOAS, focusing on the political economy of the media. He extensively worked in Egypt, Bahrain, West Africa, the UK and US. 

Opinions expressed in this article remain those of the author and do not necessarily represent those of al-Araby al-Jadeed, its editorial board or staff.