3:14am , Sunday 2nd October 2022

Contracts for Enslavement (2)

4 September 2022

Government Companies’ Shady Employment Policies

Illegal labor supply companies (or employment agencies) in Egypt have appeared again, 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 through scrupulous contracts that deny employees any remuneration or compensation rights as per Egyptian employment laws.

This investigation documents how government companies and banks employ thousands of workers through labor supply companies in violation of the Labor Law and resulting in workers losing their rights.
Some of these entities include the 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 labor supply business by establishing two companies that provide workers to entities in the petroleum sector, like the Egyptian Petroleum Services Company (EPSCO) and the Alexandria Petroleum Maintenance Company (Petromaint).

Labor 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 500 to 600 other workers.
This came about in the aftermath of a government decision to give temporary employees a new status as full time employees after the revolution of January 2011.

Shafiq and his colleagues were optimisticly hoping that they will get indefinite employment contracts, but their wishes were not fulfilled.

Shafiq says, “We thought that this decision would vindicate us. 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, Shafiq 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 retrieve their due from the previous temporary employment that they had with the same company.

We have approached the government spokesperson and the Ministry of Manpower and Immigration for a reaction to the findings of this investigation, but no response has been received by the date of publication of this investigation.

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Article (16) of the Egyptian Labor Law No. (12) of 2003 prohibits hiring workers through labor 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 managements of the companies and factories in which they will work, forcing the prospective workers 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 labor supply contracts within government companies.
Our findings point that there are about 40000 such specially supplied laborers in eight out of the twenty three companies scrutinized by this investigation, after examining the number of workers declared in companies’ annual reports and the number published on their websites.

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, and the smallest number was hired by CIB Bank with 407 workers.

company iconNumbers of workers contracted through labor supply agents operating within companies


EPSCO

16000

Petromaint

4500

Petrojet

4000

Arab Contractors

12500

National Investment

522

Misr Cement – Qena

501

Castle Holdings

500

CIB Bank

407

Shaaban Khalifah, the head of the Private Sector Workers’ syndicate says that the government is the authority entrusted with protecting workers and preserving their rights.
When the companies owned by the government enter into contract with supply companies, they violates 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 work risks and prohibits arbitrary dismissals, but all these practices are happening within government-owned companies, Shaaban explains.

Shaaban accuses labor supply companies of exploiting workers through giving them low wages, denying them benefits and assigning them long hours. On top of that, they “avoid giving workers their due rights.”

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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; protecting laborers from work hazards while ensuring them security, safety and professional protection.
The law also prohibits arbitrary dismissal.

There are 597 labor supply companies in Egypt

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

Distribution of labor supply companies within the governorates of Egypt

Petrojet exploits its workers

The company’s 2020 introductory report announces that it has 40,000 employees, but its website states that this figure is 36,000. The 4000 difference is related to those subcontracted workers, and Shafiq is one of them.
Petrojet’s chairman, Walid Lutfi, does not deny that his company contracts manpower through special suppliers and subcontractors.
In 2011 when the government issued a decision to provide a permanent contract for temporary workers, the company decided to stop working with labor supply contractors and decided to rely on the company’s full time employees stating a decline in profits as a justification.

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

Shafiq says, “Petrojet does not have enough skilled workers, so it resorts to contractors who contract unskilled workers at a huge loss.” He wonders “why they would not return those who were originally employed and got fired from the company.”

In 2015, Petrojet introduced the daily laborers’ system (or zero hours contract) solely for those who have 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.
Shafiq explains that “the company issued those laborers 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.”

money icon Petrojet’s capital stands at approximately 3.6 billion Egyptian pounds (around $225 million US dollars).
97% of the company is owned by the General Petroleum Corporation while the Engineering Company for Petroleum and Processing Industries (ENPPI) owns 2% ، ,and the Housing Fund for the Petroleum Sector Workers owns 1% .
In addition Petrojet owns various shares in thirty other companies operating in the field of energy inside and outside Egypt.

After the daily laborer 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 the Egyptian Labor Law.
The ad hoc workers contracted on monthly basis are those who move between projects and have access to health insurance, share part of the profits at a reduced rates compared to the full time employees, but enjoy a paid annual leave.
The third type includes contracted workers who work for the company through a labor supply contractor, and they do not have any rights apart from their monthly vacations.
The fourth type includes the daily paid workers who are similar to contracted workers but could be dismissed at any time.
This is what happened with Mohammad Ezzat Al-Naqouri who returned to work at the company as a daily laborer with a new individual payment code, but the company terminated his employment when he had to take an emergency leave to care for his ill son.

The daily laborer system did not stop the company from hiring people through at least five ‘facilitators’ or ‘brokers’ in 2013-2014 according to Shafiq.
Currently, there are twenty or thirty such ‘facilitators’ or ‘brokers’ who have managed to infiltrate the company and worked to deny workers their rights.

The head of the Private Sector Workers’ Syndicate says that discrepancies in workers’ salaries within the same establishment violate Article (79) of the Egyptian Labor Law and Convention (100) of 1951 of the International Labor Organization on equal wages for male and female workers for equal work value, adding that “Unfortunately, workers hired through the supply company receive a wage that does not exceed half the wage of his appointed counterpart who was hired by the company or factory where he works.”

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Egyptian Labor Law Article (79) states that “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.”

The Ahli National Bank of Egypt

A driver at the Ahli Bank of Egypt under the pseudonym of Mustafa Al-Mahalawi fears he would meet a similar fate to Shafiq’s and Al-Naqouri’s.
He works for the bank with thousands of others through a labor supply company called International Business Services (IBS), and 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

The Ahli National Bank is the first and biggest government bank in Egypt and owns or part owns twenty-two diversified companies within the Egyptian market with an estimated total capital of 2.8 trillion Egyptian pounds, that is around $153 billion and has close to 600 branches in various governorates.

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

The Syndicate of Private Sector Workers’ head Shaaban Khalifah, says that workers appointed through labor supply companies are deprived of a number of benefits including social security and healthcare cover as well as 10% of annual profits and 7% in bonuses.

Shaaban explains that workers are deprived of all their financial rights listed in the Labor 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 a salary for those who have spent less than ten years and three months for those whose service period exceeded this period in addition to a compensation for outstanding vacation days.

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

Fourteen government companies deal with the biggest labor supply company

International Business Services is the largest labor supply company in Egypt. Its client base includes 227 companies and banks, fourteen of which are institutions wholly or partially owned by the government.

circle iconNational Bank of Egypt ( known also as Al-Ahly Bank)

circle iconCommercial International Bank CIB

circle iconHousing and Development Bank

circle iconArab Investment Bank

circle iconTelecom Egypt

circle iconArab Contractors

circle iconCairo Airport Air Cargo Company

circle iconBank of Cairo (owned by Banque Misr by 99.9%)

circle iconExeed Company (wholly owned by Telecom Egypt)

circle iconMisr Beni Suef Cement Company (National Investment Bank has 20% stakes in the company)

circle iconCanal Sugar Company (the National Bank owns 30% of the company)

circle iconCitadel Holdings Group (with shares owned by the National Bank of Egypt and CIB)

circle iconASEC Cement Company (a subsidiary of Citadel Holdings Group)

circle iconHermes Financial Holding is part owned by Abu Dhabi Islamic Bank (64.75 %) in addition to other entities

 Companies and government banks that had contracts with labor supply companies

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Click to view data:

The National Investment Bank

Housing and Development Bank

Commercial International Bank (CIB)

Banque du Caire

Telecom Egypt

EXCEED Corporation

Arab Contractors

Misr Cement Company – Qena

The (Ahly) National Bank of Egypt

Petrojet

Egyptian Petroleum Services Company EPSCO

Petromaint

Cairo Airport Air Cargo Company

Misr Beni Suef Cement Company

Canal Sugar Company

Citadel Holdings

ASEC Holding Group

EFG Hermes Holding

Suez Cement Company

Tora Cement Company

Helwan Cement Company

The National Cement Company

Suez Petroleum Manufacturing Company

Suez Petroleum Manufacturing Company

Apart from Petrojet, EPSCO specializes in supplying workers to petroleum companies as well.
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, the Suez Cement Company in which the National Investment Bank owns shares. Also the Bank of Egypt, the Religious Endowments Authority, the Holding Company for Metallurgical Industries affiliated with the Ministry of Business Sector and the Helwan Cement Company, all have shares in the Tora Cement Company.

The labor supply companies listed above also did not respond to our requests to clarify their position in view of the findings of this investigation.
The Suez Cement Company said that “all its service contracts are in compliance with the Labor Law, insurance law, human rights, the environment and safety standards,” even though the Labor Law basically prohibits labor supplies companies operation 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 were supposed to uphold labor laws in the first place.

This investigation was conducted with the support of ARIJ.

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