There will be no winners in Egypt from a confrontation of the Muslim Brotherhood government with the Sawiris family. The country's Islamist rulers don't want to see billionaire Nassef Sawiris delist his firm, Orascom Construction Industries, and head to Amsterdam. Authorities have escalated a tax probe on the family business that could compromise the move, which won backing from prominent potential investors, including Bill Gates. The high-profile spat sounds a major alarm bell to foreign investors.
Sawiris' bid to move OCI's primary listing to the Netherlands is likely to end in the delisting of one of Egypt's largest firms, with a market capitalisation of around $8 billion. The firm's global depositary receipts have already been converted into shares in the Amsterdam-listed entity, OCI NV. But the Dutch unit can't launch a mandatory tender offer for the remaining shares listed in Cairo until Egypt's regulator approves the deal.
That's unlikely to happen until OCI settles a claim that it owes up to $2 billion of unpaid taxes relating to the sale of its cement activities to France's Lafarge in 2007. OCI insists the sale was exempt from any capital gains. Analysts tend to support this view, lending credence to the allegations that the claim is politically motivated. It was raised for the first time last year after President Mohamed Mursi delivered a speech promising to step up the government's fight against corruption.
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The Egyptian government keeps saying it wants to reconcile with business leaders, yet its chaotic methods, along with a corrupt judiciary and newly politicised regulators, are creating more damage by the day. If Egypt's top homegrown entrepreneurs can't prosper in the country, foreign investors will wonder whether they should even bother to try.
