Just days after his ascension to the presidency in June 2014, President Abdel Fattah al-Sisi called upon Egyptians to donate everything they could to help solve Egypt’s economic crisis. Sisi declared that he himself would start by donating his property and half his salary for the sake of the country. Within hours of the speech, the Central Bank announced that an account called “Tahya Masr” (Long Live Egypt) had been opened to receive donations.
In July, the Tahya Masr Fund was officially inaugurated. The fund, it was announced, would be under direct supervision of the president but subject to audit by the Central Auditing Authority (CAA) for the sake of “transparency and credibility.” The Central Bank was to make a monthly announcement listing the donors and donation amounts.
Donations began to pour into the fund. Only two weeks after the inauguration, press reports estimated the donations to total some LE5 billion, all from businessmen. The exact amount of the donations was unknown. No monthly reports were ever issued by the Central Bank, neither of the donors nor of the size of donations.
Nobody seems to know exactly how much money the fund has collected, where it comes from or how it is being spent, raising many questions about the nature of the fund and the auditing body supervising it.
This February, Sisi announced that Tahya Masr had received LE4.7 billion, including LE1 billion from the Armed Forces.
Mohamed Ashmawy, the fund’s executive director, tells Mada Masr that the discrepancy in the figure announced by the president and reported in the press is due to the amount already spent on projects and services. Ashmawy himself said in a December interview that the donations had reached “LE7 billion.”
A senior executive official in the fund, who requested to remain anonymous, provides a different explanation. Donations “never reached the amount was published in the press,” he says. “The fund initially received LE4.7 billion from the military. At the time, donations from businessmen did not exceed LE3.7 billion, including LE850 million donated by the Sawiris family. These funds were deposited in banks for an entire year while studies were underway about the nature of projects that the fund will implement. Accordingly, the sum total increased to LE7 billion, due to interest on the original deposits and some additional donations.”
The official adds that some funds have been pledged, but never arrived. For example, Nassef Sawiris announced in 2014 that he would donate LE2.5 billion in recouped tax payments after courts ruled in his favor in a dispute with the Ministry of Finance. “However, the Ministry of Finance later appealed the sentence and until now a final decision has not been reached. Accordingly, he never received that amount of money and thus did not donate it,” the official explains.
In August 2014, a CAA official announced that no governmental body had yet requested an audit of the fund. “There is no objection to an audit of the fund by the CAA, as long as the law considers its sources public funds,” he added.
The question of whether or not the Tahya Masr Fund’s money amounted to public funds appeared to be settled in November 2014, when a law was finally issued to organize it. Presidential order 139/2014 decreed the formation of a special fund by the name “Tahya Masr” that enjoys legal personality, financial and administrative independence, is affiliated to the Cabinet, is based in Cairo and is entitled to open branches and offices in other governorates. According to the second article of the law, the fund is under “the patronage and care of the president of the republic.” Article 8 of the decree states that the resources of the fund are “public funds subject to the provisions of the Penal Code, to be reviewed and audited by CAA, which is to prepare a quarterly report to be presented to the president.” The Tahya Masr fund’s official website still lists the regulations given in this 2014 decree.
However, eight months later, the July 8 edition of the Official Gazette listed a new regulation titled Law 84/2015. Although it was presented as a new law, it was in fact identical to the 2014 decree, except for two amendments that exempted the fund from general government regulations and gave the president a stronger supervisory role and the CAA a weaker one.
An article was added to the law stipulating that “the president of the republic will decree the method of supervising, managing and administering financial and administrative affairs of the fund, in accordance with the nature and activity of the fund to enable it to carry out its mission without restriction by the governmental regulations referenced in any other law.” Article 8 of the old law was replaced by Article 9, which reduced the role of the CAA from “reviewing and auditing” to preparing and presenting reports on “performance indicators,” based on data prepared by an accounting office selected by the fund’s board of trustees.
A senior CAA official, who spoke on condition of anonymity, explained that the change in terminology made a significant difference in the CAA’s role. “Reports on performance” simply assess how well the body in question has performed in particular spending categories and its progress in achieving certain objectives, the official said. By contrast, “financial reports” address “financial soundness and spending integrity.”
The change in the CAA’s role coincided with a period of rising tension between the authority and the executive branch. CAA head Hesham Geneina, who launched media campaigns accusing government bodies of corruption and squandering funds, had run-ins with the Ministry of Justice, the public prosecutor and the Ministry of Interior. In July 2015, Sisi issued a decree granting himself the authority to remove the heads of independent bodies like the CAA from their previously protected positions. That law was put into effect on March 28, when Geneina was summarily removed from his post.
Ashmawy, the fund’s executive director, says the changes to the law governing the fund were not political. “The objective to ease restrictions on expenditure procedures, saving time in a way that allowed compensation and urgent help for flood victims, for example,” he explains.
The CAA official dismissed this explanation, however: “The CAA is actually involved in post and not pre-expenditure supervision. It is not clear how the CAA can obstruct rapid decision making.”
Although the law stipulates the public nature of the fund’s resources, it does not reference any role for financial auditors affiliated to the Ministry of Finance responsible for pre-expenditure supervision of public funds. Again, the fund’s anonymous senior official responds that the Tahya Masr Fund is not a governmental body, and therefore its spending is only subject to the supervision of its board of trustees and the executive council.
Osama Diab, head of corruption research at the Egyptian Initiative for Personal Rights (EIPR), believes that the law reveals a flagrant clash of interests. “It allows the party subject to supervision to choose its supervising body in exchange for a fee,” he says.
Under Egypt’s tax code, donations to the government, public bodies or to bodies affiliated to local administration are 100 percent tax deductible with no maximum limit on deductions, explains a senior official at the research unit of the Tax Authority. Deductions for donations to private charities and other non-governmental bodies are capped at 10 percent of taxable income.
The law governing the Tahya Masr Fund states that it is affiliated to the Cabinet. Therefore, the official explains, “It will be treated as a public body regarding tax exemptions of donations made into it.”
In addition to this privilege, Article 8 of the law governing the fund states that interest and credit facilities the fund receives are exempted from all taxes and fees. “Also income laws, stamp taxes and state resources development fees do not apply to the fund, nor any other form of direct fees or taxes in force at present or in the future,” the law continues.
“This means that all of the fund’s resources come out of revenues that would otherwise enter the state budget from income tax. This demands a complete commitment by the fund to disclose its resources and sources as well as every aspect of expenditure. It also calls for full supervision by the CAA, rather than the deficient oversight that is presently the case,” says EIPR’s Diab.
“These provisions expose the attempt by the state to provide the fund with contradictory privileges, including exemption from the supervision required of public funds on one hand, and exemption from the taxes imposed on private funds on the other,” he adds. “Private funds, which are similar to Tahya Masr, contribute 10 percent of their income to the state budget in something akin to taxation.”
“Basically, we cannot look upon Tahya Masr except as a fund that is being run outside the general budget without any supervision worth speaking of,” Diab argues. “This again raises concern regarding the lack of financial soundness, transparency and integrity in such cases — a problem that has been criticized in recurring reports from the World Bank and the IMF, as well as the OECD.”
The fund’s official website does not reveal the size of its activities, except for brief notes regarding just three projects.
A senior fund official, who would only speak on condition of anonymity, said Tahya Masr’s activity includes investment and development projects. “The former works through a holding company that owns a number of companies that contribute to revitalization of the economy. It’s profits support the rest of developmental activities,” the official explains.
“The fund set aside about LE2.5 billion from the donations to establish a holding company in partnership with the National Bank of Egypt and Banque Misr,” the official elaborates. “It has already spent LE1.4 billion compensating flood victims in Alexandria, Kafr al-Sheikh and Beheira, it spent another billion on the transfer and resettlement of the Doweiqa population to safer locations away from the dangers of rockslides. The rest was spent on running costs of a long list of existing development projects.”
Development projects focus on certain social and economic sectors. In terms social development, the fund works in the health and education sectors, the official adds.
“In the health sector, the fund works to combat Hepatitis C in coordination with the Ministry of Health and a network of NGOs, distributing financial contributions,” the official explains, adding that 40 percent of funds go to Tahya Masr, 40 percent to the ministry and 20 percent to NGOs. “In the education sector, the fund focuses on the presidential education development program, which aims to build 100 special schools in collaboration with Japan. The headmasters of thee schools will be Japanese, their assistants Egyptian and the curriculum Japanese.” The official adds that these schools will charge fees in line with those of pilot schools, in the hope of eventually being self-financing.
“The social activity of the fund addresses the projects of the Tahya Masr City, where the fund aims to resettle the Doweiqa population over three stages, each comprising 10,000 housing units; a project for homeless children that targets the development of care centers for street children in collaboration with the Ministry of Social Solidarity at a cost of about LE168 million, of which LE118 million will be contributed by the fund; a resettlement project for desert villages in Upper Egypt through the completion of its services and infrastructure,” he says. “The social activity also involves the support of 1,000 indebted women through paying their debts in collaboration with the Misr El Kheir Foundation, as well as rehabilitating the al-Assal area and the Guirgis and Samaan slums.”
The fund’s economic activity includes a “taxi ownership project,” the official explains. The project offers vehicles at a discount of LE79,000 instead of LE115,000, 25 percent of which was due as a downpayment. Participants were also provided with smartphones to collect fares digitally, a card entitling them to maintenance services at accredited centers and free natural gas for the vehicle. Out of 10,000 applicants who passed health and credit checks, 1,000 beneficiaries were selected by lottery. Another project, in partnership with the Supply Ministry, offers 850 refrigerated vans, for which the fund will provide 75 percent of the cost. Other economic activities include revolving loans for women-headed households and leadership training to prepare youth for political and managerial positions in the government.