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Egypt’s government-owned companies have shady employment policies

August 22, 2022 at 1:45 pm

Construction workers [ARIJ]

Illegal labour supply companies — employment agencies — in Egypt have reappeared, this time operating through companies that are wholly or partially owned by the government. Some of these are privately owned entities that have contracts to supply workers to companies using contracts that deny employees any remuneration or compensation rights to which they are entitled under Egyptian employment laws.

This investigation documents how government companies and banks employ thousands of workers through labour supply companies in violation of the Labour Law, resulting in workers losing their rights. These entities include Al-Ahly National Bank, Egypt’s oldest bank; Petrojet, the largest contracting company in the petroleum sector; and twenty-one other companies wholly or partially owned by the government. Moreover, government entities themselves engaged in the illegal labour supply business by establishing two companies that provide workers to entities in the petroleum sector, such as the Egyptian Petroleum Services Company (EPSCO) and the Alexandria Petroleum Maintenance Company (Petromaint).

Labour supply agents employed by government companies

Forty-one-year-old Mohammad Shafiq worked at the Petroleum Projects and Technical Consultations Company — Petrojet — for seven years before he was fired along with between 500 and 600 other workers. This followed a government decision after the January 2011 revolution to give temporary employees full time status. Shafiq and his colleagues were optimistic that they would get indefinite employment contracts, but it did not happen.

“We thought that this decision would vindicate us,” he explained. “We were surprised when the company came up with its decision not to give us permanent contracts. We felt that we were treated unfairly and as a result have lost the years of hard work we put in. Our future was destroyed, and we felt completely displaced.”

However, he returned to work at Petrojet through a supply company. He was fired again in 2015 following his attempts to collect signatures from workers dismissed in 2011 to demand that they be given their due from the previous temporary employment with the same company.

Article (16) of the Egyptian Labour Law No. (12), dated 2003, prohibits the hiring of workers through labour supply contractors. Contractors, however, circumvent the laws by playing the role of “facilitators” or “brokers” through companies that act as intermediaries between workers and the management of the companies and factories in which they will work. Prospective workers are forced to sign basic contracts that deprive them of rights and benefits normally afforded to permanent employees.

There are no accurate figures for the number of those who work through such labour supply contracts within government companies. Our findings suggest that there are around 40,000 such specially supplied labourers in eight out of the twenty three companies scrutinised during this investigation, based on an examination of the number of workers declared in companies’ annual reports and the number published on their websites.

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The Egyptian Petroleum Services Company (EPSCO) had the lion’s share with a total of 16,000 workers, followed by Arab Contractors with nearly 13,000 workers, then Petromaint and Petrojet with 4,500 workers each. The smallest number was hired by CIB Bank, with 407 workers.

Shaaban Khalifah, the head of the Private Sector Workers’ Union, pointed out that the government is the authority entrusted with protecting workers and preserving their rights. When the companies owned by the government enter into contracts with labour supply companies, they violate Article (13) of the constitution, which obligates the state to preserve workers’ rights and build balanced working relationships between the two sides of the production process. The law also protects workers from workplace hazards and prohibits arbitrary dismissals, but all these practices are happening within government-owned companies, he added.

Khalifah accused labour supply companies of exploiting workers through giving low wages, denying them benefits and assigning long hours to them. Moreover, they “avoid giving workers their due rights.”

Article (13) of the constitution on the “right to a safe working environment”, commits the state to preserving the rights of workers; building a balanced working relationships between the parties of the production process; ensuring means of collective bargaining; and protecting labourers from hazards in the workplace while ensuring that they have security, safety and professional protection. The law also prohibits arbitrary dismissal.

There are 597 labour supply companies in Egypt

An analysis of the Yellow Pages website that specialises in collecting data on companies operating within Egypt’s different governorates, including data on labour supply companies, shows that by the end of 2021, the number of labour supply companies in Egypt had climbed to 597. Greater Cairo has the biggest share with 241 such companies, while Giza came second with 228.

Petrojet exploits its workers.

Petrojet’s 2020 introductory report announced that it had 40,000 employees, but its website stated that this figure was 36,000. The difference of 4,000 is related to subcontracted workers, of whom Shafiq is one. Petrojet’s chairman, Walid Lutfi, does not deny that his company contracts manpower through special suppliers and subcontractors. In 2011, when the government issued its decision to provide a permanent contract for temporary workers, the company decided to stop working with labour supply contractors and decided to rely on its full time employees, citing in justification a fall in profits.

This decision did not hold for long, as the company had to resort to contracting with labour supply companies to fill the vacancies left by the dismissal of nearly 600 workers in 2011 to reduce losses. On 15 March, 2015, a project manager in the company sent a letter to Egypt Gas which was a subcontractor through agreement 1375/2014 signed on 26 November 2014 calling on the company to dismiss the supervisors and the labourers responsible for some projects and to provide a supervising team with sufficient experience to increase productivity. The letter revealed that the contractor violated six articles of the agreement signed between the company and Egypt Gas.

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“Petrojet does not have enough skilled workers, so it resorts to contractors who take on unskilled workers at a huge loss,” said Shafiq “Why they would not rehire those who were originally employed and got fired from the company?”

Construction workers [ARIJ]

Construction workers in Egypt [ARIJ]

In 2015, Petrojet introduced the daily labourers’ system — a zero hours contract — solely for those who had previous experience working for the company and were in possession of an old individual payment code in order to ensure they had the necessary skills. According to Shafiq, “The company issued those labourers with new payment codes to thwart any attempts for claims based on their previous employment that goes back to before the January revolution and any demands that may arise from them to be reinstated.”

Petrojet’s capital stands at approximately 3.6 billion Egyptian pounds (around $225 million). Almost all of the company — 97 per cent — is owned by the General Petroleum Corporation while the Engineering Company for Petroleum and Processing Industries (ENPPI) owns two per cent, and the Housing Fund for the Petroleum Sector Workers owns one per cent. Furthermore, Petrojet owns various shares in thirty other companies operating in the energy field within and beyond Egypt.

After the daily labourer system came into effect, Petrojet became an employer of four different types of employees: the full-time permanent contract workers are those who enjoyed all the benefits listed in Egyptian Labour Law; the ad hoc workers contracted on a monthly basis, those who move between projects and have access to health insurance, share part of the profits at a reduced rate compared with full-time employees, and enjoy paid annual leave; contracted workers who work for the company through a labour supply contractor, and do not have any rights apart from their monthly vacations; and the workers paid daily who are similar to contracted workers but can be dismissed at any time. This is what happened with Mohammad Ezzat Al-Naqouri, who returned to work at the company as a daily labourer with a new individual payment code, but the company terminated his employment when he had to take emergency leave to care for his ill son.

The daily labourer system did not stop the company from hiring people through at least five “facilitators” or “brokers” in 2013-2014, revealed Shafiq. There are currently twenty or thirty such “facilitators” or “brokers” who have managed to infiltrate the company and seek to deny workers their rights.

Khalifah of the Private Sector Workers’ Union added that discrepancies in workers’ salaries within the same establishment violate Article (79) of the Egyptian Labour Law and Convention (100) of 1951 of the International Labour Organisation on equal wages for male and female workers for equal work value. “Unfortunately,” the union official said, “workers hired through the supply company receive a wage that is less than half the wage of appointed counterparts hired by the company or factory where they work.”

Egyptian Labour Law Article (79) states: “If an employer entrusts another employer to perform his work or part of it in one work area, the latter must treat his workers and the workers of the original employer equally in all rights and shall be supportive of this plan.”

Al-Ahly National Bank of Egypt

A driver at Al-Ahly National Bank of Egypt — his pseudonym is Mustafa Al-Mahalawi — fears that he will meet a similar fate to Shafiq’s and Al-Naqouri’s. He works for the bank with thousands of others through a labour supply company called International Business Services (IBS). They all receive lower wages and fewer privileges than their peers appointed directly by the bank.

The letter of appointment designating the driver’s task

Al-Ahly National Bank is the first and biggest government bank in Egypt and owns or part owns twenty-two diverse companies within the Egyptian market with an estimated total capital of 2.8 trillion Egyptian pounds (around $153 billion) and almost 600 branches in various governorates.

Apart from Al-Ahly National Bank and Petrojet, we documented the existence of twenty-one other companies and banks that have used labour supply companies, mostly with International Business Services (IBS).

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Union chief Khalifah said that workers appointed through labour supply companies are deprived of a number of benefits including social security and healthcare cover as well as 10 per cent of annual profits and 7 per cent in bonuses. He pointed out that workers are deprived of all their financial rights listed in the Labour Law should they be arbitrarily dismissed. These rights include a bonus of no less than two months of the total wages for each year of service and a compensation payment in lieu of their notice of termination. This is calculated at a rate of two months’ worth of salary for those who have spent less than ten years and three months for those whose service period exceeds this, in addition to compensation for unused vacations.

The majority of workers prefer not to resort to the judicial system to fight for their lost rights due to lengthy litigation which can last for years. According to the lawyer at the Legal Cooperative to Support Labour Awareness, Yassir Sa’ad, the litigation process is also cumbersome, costly and morally taxing to workers’ livelihood and family.

Apart from Petrojet, EPSCO also specialises in supplying workers to petroleum companies. This company alone supplies 16,000 workers to 46 companies. Petromaint, in which Petrojet has shares, supplies nearly 4,500 workers to various other companies.

Companies besides IBS supply workers to companies such as the Suez Oil Processing Company; the National Cement Company; Misr Cement Company in which Banque Misr owns shares; and the Suez Cement Company in which the National Investment Bank owns shares. Moreover, the Bank of Egypt, the Religious Endowments Authority, the Holding Company for Metallurgical Industries affiliated with the Business Sector Ministry and the Helwan Cement Company all have shares in the Tora Cement Company.

According to the Suez Cement Company, “All service contracts are in compliance with the Labour Law, insurance law, human rights, the environment and safety standards,” even though the Labour Law basically prohibits the operation of labour supplies companies in Egypt.

Government-owned companies and banks employ tens of thousands of workers like Mohammad Shafiq and Mustafa Al-Mahalawi who are robbed of their rights by national public sector companies that are supposed to uphold labour laws.

We have approached the government spokesperson and the Ministry of Manpower and Immigration for a response to the findings of this investigation, but no reply had been received by the date of publication. Moreover, letters have been sent to companies whose names appeared in the investigation to give them their right of reply, but none have responded. The labour supply companies listed above did not respond to our requests to clarify their position in view of the findings of this investigation.