Fully explained for non-specialists: The split-up of the National Company for Iron and Steel

CAIRO – 18 January 2021: The National Company for Iron and Steel is going through a horizontal split-up, a difficult step that was met with widespread criticism, prompting the Cabinet to explain the decision in a statement.

The Iron and Steel company, the splitting company, will be liquidated and from which the Iron and Steel Company for Mines and Quarries, the split company, will emerge as an Egyptian joint stock company. The Horizontal split-up will include all the splitting company’s material and moral components and the transfer of all assets, liabilities and property rights in the book value as in the assets found in the original balance sheet.

The book value is roughly equal to the total amount the shareholders would get if the Iron and Steel Company were liquidated. The new split company, owned by the very same shared holders of the splitting company, will have a paid capital of L.E. 195 million and a licensed capital of L.E. 500 million.

Shareholders are happy about the split-up because the company was only incurring loses despite pumping L.E. 9.3 billion, borne by the state treasury, from 2005 to 2016 to reform the financing structure.

The main suppliers of the company accumulated debts amounting to L.E. 6 billion by June 2020, and in the same year the company took L.E.417 million from the Holding Company to pay salaries.

The losses by that time had reached L.E. 8.2 billion with debts at a high of L.E. 8.3 billion to gas, electricity, coke, taxes and other companies.

All the while, the factory only produced 10% of the total steel amount it is designed to output in June 2020. The sale price versus the cost price became L.E. 9,000 to L.E. 34,800, respectively.

Many factories were established during the Nasser-era and were successful at the time, leaving many Egyptians to this day nostalgic for an industrial Egypt. Decades of mismanagement and failure at reform rendered the huge factories almost unfixable. Some factories have been liquidated, such as the National Company for Cement in 2018, and others privatized.

Workers are also unhappy, reiterating through the years that the factories can be reformed, although for many years they received their wages extremely late and did not work at their full capacity because of the broken system of the factory. The Cabinet’s statement promised they would receive their full rights, nevertheless, thousands of workers will be left without a job.