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PUBLIC MILLS PROTEST FLOUR TENDERS
BY AMENA BAKR
After years of dwindling loaf sizes and chipped
teeth, the government stepped in last year to regulate the quality
of subsidized bread. By August, the Ministry of Social Solidarity
was boasting that 95 percent of the country’s 16,700 bakeries
licensed to sell subsidized bread had signed a “voluntary”
contract whereby the government would provide them cheaper flour
to produce higher quality subsidized bread.
But supplying these bakeries with the high-quality flour required
to meet their end of the bargain has proven unexpectedly challenging.
For starters, the ministry had to shake up the decades-old flour
distribution system. Previously, the government was responsible
for importing the wheat used to make subsidized bread, and then
delivering it to the mills to be grinded, and storing the extra
wheat. “Using this system was a huge waste of the [LE 9 billion]
subsidy fund allocated to subsidizing bread because a lot of money
was wasted in the transport and storage stages,” says Darwish
Mostafa, first undersecretary of the Ministry of Social Solidarity.
“Not to mention that some of the wheat was stolen by the mills
and sold on the black market.”
The ministry’s solution seemed simple enough: hand over the
supply chain to the most qualified candidates. A tender would be
held and public or private mills would be selected based on their
ability to supply domestically produced flour at the best price
according to the ministry’s baladi bread formula: 22 percent
imported soft wheat, 60 percent low-grade domestic red wheat and
18 percent domestic corn flour. “The idea was that we wanted
the mills to take the responsibility for buying the wheat, storing
it and delivering the end product – flour,” explains
Mostafa.
As a pilot project, the ministry held tenders for three-month contracts
to purchase, mill and deliver a portion of the flour allocated to
subsidized bread in three governorates – Alexandria, Minya
and Ismailiya. “We gave a fair chance to both public and private
mills to take part in the bids and the ones that offered us the
lowest price would win,” says Mostafa.
But troubles soon began after a private mill in Alexandria won the
bid in March after offering to sell the flour at LE 1,494 per ton,
which was cheaper than the lowest public mill bid. Public mills
protested that the tender was unfair from the start as private companies
have less restrictive labor policies and advanced equipment, so
are in a better position to lower prices. Furthermore, by awarding
the contract to a private company, public mills would be allocated
a smaller share of wheat to grind. Workers in these mills –
who receive a bonus based on the volume of flour output –
realized the new arrangement would reduce their incomes.
As tempers flared at public mills, one public company agreed to
reduce its price to the same level, which gave the government a
way out of the situation. “We decided to divide the allotted
amount of flour between the private company and a public company
that agreed to go down to the same price,” says Mostafa.
But matters only got worse after the March 15 Minya tender, where
a private company offered to sell the flour at LE 1,520 per ton,
while the lowest-bidding public sector mill refused to budge from
LE 1,524. “Although the difference was tiny, we had no choice
but to give the bid to the private company. And we couldn’t
go back on our word because we wanted to be taken seriously by the
mills,” explains Mostafa.
Facing pressure from public mills, Minister of Social Solidarity
Ali Moselhi agreed to keep the allotment of flour to public mills
in Minya unchanged, and ship 10 percent of the surplus to Cairo
and Giza. But in shipping the surplus flour to Cairo, the ministry
also transferred the problem. Shortly after the decision was announced
on March 28, more than 9,000 workers at North Cairo and South Cairo
public mills walked off the job in protest.
“Bringing in flour from Minya would mean a total loss of 842
tons for both companies and in turn would cut down on the workers
bonus,” explains Hussein Boudy, head of the Mill Owners Association,
pointing out that the average salary of a mill worker is just LE
300 per month. “The workers really need their bonus, which
is the only way they can survive given today’s rising prices.”
Once again, Moselhi was called in to resolve the issue. Instead
of bringing the extra flour to Cairo and Giza, he agreed to ship
it off to Damietta and Sharqiya governorates, where there is a shortage
of flour in the market. Satisfied with the decision, mill workers
ended their strike on April 4 – leaving behind a trail of
allegations about who was pulling the strings to incite the worker
discontent – everything from communists to Muslim Brotherhood
to reactionaries at the Holding Company for Mills.
Mostafa suspects the holding company, which oversees 90 public sector
companies that produce subsidized flour, is responsible. “I
believe the holding company is behind all these protests because
they are the ones who stand to lose most if a proper system [is
implemented],” he says. “Let’s just say that there
was some ‘funny business’ before.”
Although the Egyptian Trade Union Federation (ETUF) threw its support
behind the workers during the strikes, Ibrahim Al Azhari, secretary
general of ETUF, told Business Monthly that the suggestion that
the holding company was inciting labor unrest is entirely plausible.
“Recently, we had the protests at [Ghazl] Shebeen Textile
Company that were fueled by the management because they didn’t
get privatized, and I think in the case of these mills the management
could be involved.”
Despite repeated requests by Business Monthly, the Holding Company
for Mills declined the opportunity to comment on the allegations
and explain their views on the new system. Boudy, however, has a
hard time accepting the ministry’s ‘conspiracy theories.’
“I don’t think that the holding company was behind anything.
I just think that this system is so unfair for the workers that
they protested.”
He argues that public sector mills are incapable of competing with
their private sector counterparts because their machinery is outdated
and their payroll is significantly larger. In an effort to level
the playing field, the Ministry of Investment last month announced
it would provide LE 1.2 billion to revamp all public sector mills
over a three-year period.
In the meantime, the Ministry of Social Solidarity is determined
to make the new flour distribution system work. “I can assure
you that none of the mills, whether public or private, are losing
money; they just want to make more profit with no account to the
masses who need this bread,” says Mostafa. “At the end
of the day, our main goal is to give the public good quality bread
at a cost of 5 piastres, and that’s all that matters.
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