(AlBorsa Photo)
By Omar Abdel Al-Hamid and Rana Fathy
Social justice is a hotly debated topic amongst the business community and grassroots organizations in Egypt currently, especially in light of the new government’s interest in improving conditions for the poor.
Tony Vrije, chairman of Valley Group Holdings, one of the largest private companies operating in the agricultural sector, said in an interview with Al-Borsa that the concept of social justice was not a high priority for many in the private sector, adding that providing food at lower prices offered no income benefits for companies.
Businessmen and private sector workers have faced accusations of greedy and that their profits do not benefit fellow citizens or the community. These accusations were denied by businessmen and investors, who have stressed that many employment opportunities were created by the private sector. This showed their sense of social responsibility, as many employees were kept on board despite the losses experienced since January 2011, they have argued.
According to Vrije, it is not the price of food that is the problem but income disparities. No matter the price of a food product, if an individual’s income is sufficient, they can purchase it. This can be aided by the private sector’s role in generating job opportunities.
Vrije told Al-Borsa that food and petrol subsidies harmed the principle of social justice.
“A better method is to provide cash support for groups that need help while also providing real jobs for those capable of work. Constant government support creates an unfair market as one product will have two prices, exposing companies to losses.”
Tony focused on clarifying the different interpretations of social justice among various political schools of thought. Under socialism, social justice meant that each individual was provided with adequate food and shelter. In the modern world, however, the definition of social justice has shifted to mean that individuals have equal opportunity to work and increase income.
“America, for example, supports the poor through ration cards that are distributed to individuals based on a value of financial support that is determined by the government. This both allows them to purchase food products and still leaves room for fair competition between all parties.
He explained that Valley Holding Group, in the spirit of social responsibility to the wider community, runs technical education and support programs serving 13,000 students annually with the goal of upgrading their ability to work and compete in the job market. Valley Holding has also provided approximately 5000 jobs since entering the domestic market as well as opening 5000 homes to families. These initiatives represent the essence of social justice, he said.
Vrije criticized Egypt’s transition to an open economy over the past ten years, saying the process was hasty and harmed national industries by not taking into account obstacles Egyptian companies face when competing in global markets.
“We entered into competition with international companies lacking trained labor and laws that reflect reality. Egypt was rated 114th in competitiveness out of 142 countries, a ranking that is not commensurate with the nation’s size.”
Current economic policies needed to be reconsidered so that local industries could independently stand up for themselves and develop into real competitors against international companies.
Vrije also discussed Valley Holding’s investments, which exceed EGP 2 billion. In Sudan, Valley Holding invested in the cultivation of 5000 acres of corn and yellow bean soy.
He predicted that sales would total approximately EGP 2.2 billion by the end of the year, an increase of about EGP 400 million since last year.
Valley Holdings Group holds approximately 45% of the white poultry market and 20% of the fattening poultry market among others, in addition to a feed factory that accounts for approximately 15% of the domestic feed market.
Valley Group rented a factory for a period of five years in order to ease the process of setting up its own plant feed and poultry and fish farms to meet the company’s needs.
Vrije hopes to increase the production capacity of fish farms in Natrun and Fayoum to 50,000 tons next year and over 100,000 tons by 2015 through expanding special feed production rather than relying on imported products.
One factory began experimentally producing single and double-calcium phosphate last October with a total cost of about EGP 70 million. Valley Group also aims to pump EGP 100 million into the second phase of the company Nile Unloading and Storage, founded in partnership with Mead Sofits. This comes on the heels of an initial EGP 300 million investment.
He explained that the river port project announced by Valley Holding and Med Sofits is the largest in the Middle East and North Africa. It aims to reduce ship traffic in Alexandria’s port.
Statistics indicate that waiting periods at Alexandria’s port range from 8 to 12 days and costs can reach $40,000. This translates into higher costs for consumers. Valley Holding Group’s port project aims to reduce the waiting period for boats to one day only.
The first phase of the project also includes building 17 silos with the capacity to process 130,000 tons of seeds on an area of 45,000 square meters. Equipment for unloading and storing cargo both within the Mediterranean Sea and in the company’s storage terminal in the Max neighborhood will be provided.
Sixty-five percent of the cost of the first phase of the project was funded with EGP 300 million from Valley Holding’s own resources while the remaining 35% was covered through a loan from Commercial International Bank (CIB).
Vrije revealed that the company aims to obtain 55% of funding for the second phase of the project by borrowing and the rest will be covered by shareholders. Valley Holding has begun contacting a group of banks to provide financing, but CIB is the favored provider.
The second phase of the project will include establishing five new grain silos, increasing output from 130,000 tons to 230,000 tons per year. This will increase hourly output to 1200 tons. According to Vrije, Nile Unloading and Storage will recover capital losses within five years.
Nile Unloading and Storage intends to build three river ports in the provinces of Upper Egypt during this second phase of the project.
Valley Holdings had established two factories for the purpose of producing and packaging olive oil, one in Wadi Natrun and another in Sadat City. An estimated investment of EGP 30 million went into these factories and production capacity hovers around 20,000 tons per year. The company hopes to double this rate within five years.
Sixty percent of production goes to European markets, while Valley Holding buys a portion to cover the needs of the two private farms in northern Sinai. These factories produce large amounts of oils.
The olive farm in Wadi Natrun owns an area of approximately 3000 acres.
Vrije stressed that the group continues to pump investments into local markets, despite the difficulties faced by investors due to bureaucratic government institutions. This forms one of the most important concerns of new investors alongside the security situation within Egypt.
“Obtaining government approval has become very difficult, especially following the revolution. Unfortunately some ministries do not have the power to make investment decisions.”
“Valley Holding obtained approximately 11,000 acres outside of Luxor to take poultry farms away from population centers, but we cannot start work without receiving certain approvals through government channels.”
It is worthy to note that Valley Holding was founded by Albanians Philip Nasrallah and Moses Vrije in Egypt in 1984. The company is not on the stock exchange and owns about 16 other companies that operate in various industries such as poultry farming, land reclamation, glass container unit and refrigerator production, feed, fish, olives, pickles, olive oil, fruits and vegetables.
Valley Holding’s capital is valued at EGP 2,305,300 spread over 59,305,300 shares valued at one pound per share. The Vrije family owns 88.9% of shares, Horus Food 5.9%, and the Lebanese Capital Trust Company holds 5.20%.
