Funding the Brotherhood

The Muslim Brotherhood’s (MB) celebrations last year marking the passage of the first centennial of the birth of the movement’s founder, Hassan al Banna, and while preparations were in progress by the legally banned group in Egypt for the 80th anniversary since the founding of the movement, the relationship between the group and the Egyptian government has entered a new stage that surpasses all confrontational scenarios since its inception. The difference lies in the government’s change of strategy in tracking the Brotherhood; erupting after the recent outbreak of investigations revolving around the al Azhar militias – an issue that has so far involved 153 suspects of which approximately 114 are Azhar university students affiliated to the MB and 39 senior leaders, headed by Engineer Khairat al Shatir, one of the two deputies to Brotherhood leader and senior guide, Mohammed Mahdi Akef. Observers consider al Shatir to be the ‘primary financer’ of the organization at a time when the state seeks to strike its economic entities.

What came as a surprise was the explosion of accusations that the government directed at the group’s leaders that had never been broached before, such as terrorism, the formation of military militias, and the preparation of members to be sent for jihad abroad. Responsible for causing a stir, the most important of the aforementioned accusations in the history between Egyptian security authorities and the MB is ‘money laundering’, which 29 of the group’s leaders now face, all of whom are businessmen, headed by al Shatir, and the Brotherhood’s ‘millionaire’, Hassan Malik, in addition to the unprecedented inclusion of the MB’s international relations coordinator and businessman, Youssef Nada, who resides in Switzerland and who is now wanted by the Egyptian authorities.

With the heightened speculation by reason of these accusations, the situation took on a new dimension in the form of a rumor alleging that roughly 21 billion Egyptian Pounds (LE) have been withdrawn from the Egyptian stock exchange following the closure of companies and publishing houses owned by the detained members of the MB, which may lead to the collapse of the Egyptian stock exchange. Despite the Egyptian Capital Market Authority’s (CMA) haste to dispel these claims, affirming the stability of the stock market, questions and fears have surrounded the size of the Brotherhood’s investments and the extent of their influence on the Egyptian stock exchange. But questions remain: Who are the businessmen among the Brotherhood and what is their position in the stock market? Do they fund the group or are they only affiliated to it? Will the detention of these members affect the sources of funding? The most important question, however, is related to the government’s shift in strategy towards striking the group’s economic entities and arresting its businessmen – has the state come to the realization that the MB’s businessmen have come to wield an important financial and political influence on the street in favor of the organization so that it must be immediately confronted, especially since the group’s huge financial expenditures are what has fortified against the government’s attempts to quell it all this time? And will the detention of these members detrimentally affect and weaken the group?

There are no studies on the MB’s financial status and it is a matter that has yet to be penetrated, shrouded in secrecy as it is. Still, some names remain in the limelight and they are referred to as the businessmen of the group, the most prominent of whom is Engineer Khairat al Shatir, the part-owner of the company ‘Salsabil for Information Technology’, which has investments estimated at several million pounds by virtue of al Shatir being a substantial investor in a number of companies and banks. Al Shatir is considered the chief financer of the organization, his investments exceeding LE 80 million and his work force comprised of approximately 1,000 employees. Hassan Malik who goes by the epithet of the ‘organization’s millionaire’ is the richest member in the MB, his investments estimated at over LE 250 million. He owns one of the most famous furniture showrooms in Egypt, ‘Istiqbal’, in addition to ‘Malik for Trade and Ready-Made Garments’ and ‘Malik for Spinning and Weaving’, in addition to being an investor in other companies such as ‘Al Nur for Trade and Commissions’ and also clothing companies. It is estimated that the number of employees working on his projects, which have been closed down lately, is 500 workers, most of whom are members of the MB.

The name Youssef Nada is among the most prominent names considered one of the primary financers of the movement, his contributions accounted to be worth billions. Nada’s funds had been frozen as a result of a decision by American President, George Bush, and who was described by the US as the biggest sponsor of terrorism. Nada was forced to liquidate Al Taqwa Bank, which he had founded in the Bahamas with the participation of a large number of the group’s leaders, both internally and abroad – shareholders included Sheikh Youssef al Qaradawi. Current MB senior guide, Mohammed Mahdi Akef confirmed that he had had several thousand pounds in his account at the bank. The fact that Nada’s businesses and relations are spread over a multitude of countries worldwide makes it difficult to accurately determine the scale of these businesses.

Other names considered less prominent and less wealthy individuals include Engineer Medhat al Hadad, the owner of Alexandria’s ‘Al Arabiya Construction’ company; Dr Diaa Farahat who runs Al Diaa commissions for electronic trading in the Daqahliyah governorate; Muhammed Usama Sharabi who owns a travel agency; Dr Khaled Ouda, the son of the late Abdel Qadir Ouda, who was a distinguished member of the MB, the son owns a number of companies and factories manufacturing clothes, foodstuffs and software. This is apart from other leaders in the group who own a number of publishing and printing houses, in addition to the libraries affiliated to them.

Regarding the financial situation of the MB in the Egyptian stock market, financial analyst Haitham Abdel Samei said that there are no estimates as to the size of the Brotherhood’s investments in the stock exchange and that what is being rumored is the figures of the total fixed assets, not liquidity, pointing out that there have been huge exaggerations in the matter. He added, “There are a limited number of companies, such as Orascom Telecom and Orascom Construction, among other companies that exert control on the capital index by virtue of controlling 50 percent of the market value of the index. The Muslim Brotherhood is far removed from these companies, which confirms that regardless of the size of the MB’s investments, there are no fears and these investments cannot have an adverse effect on the stock market. Abdel Samei explained that one cannot determine the size of what the MB owns, because it is impossible to find out the affiliations of all those working in the stock exchange, adding that even if groups were of a particular religious affiliation, capital, as such, does not conform to this categorization. He pointed out that although it was likely that some of the MB members could be investors in some companies, it doesn’t give them the power to control or exert influence.

An expert from the CMA, Usama Shawqi agrees that it would be difficult to estimate the size of the MB’s investments, likewise applies for the names of the businessmen within the organization, as there could be indirect investments through underwriting companies operative in the stock market. He added that some may use the names of their wives or mothers, which makes it harder to trace. Like Abdel Samei, he sees that the MB cannot influence, control or disrupt the market.

For his part, financial analyst and member of the MB and the Egyptian Press Syndicate, Mamdouh al Wali states that last year Arab markets witnessed a total loss of approximately US $446 billion, from which Egypt suffered on a minor scale. Al Wali added that the financial market is an incredibly sensitive one and that when disruptions such as these occur [the latest ones in the Egyptian stock exchange], which the government dealt with in a random manner, it results in tension in the air with a sense of anxiety especially since Arab investors have religious inclinations. He added that what had transpired had spread a sense of fear for many. Likewise, al Wali said the number of MB investments in the stock exchange cannot be determined, pointing out that the past few weeks had seen a noticeable decline after a number of companies were struck, which is among other reasons. Al Wali considers the money laundering accusation directed at the leaders of the group an accusation that harms the country before it does the Brotherhood, explaining that this accusation and the government’s admission of it in that regard classifies Egypt in a different category with other countries that practice money laundering and bans dealing with them, discouraging investments. He affirmed that the government’s political weapon used against the MB will backfire in its face first.

Financial expert Hamdi Abdel-Azim and former president of the Sadat Academy for Administrative Sciences estimates the MB’s investments at LE 20 billion. He states that this estimate is based on the details published on the MB issue of late such as an article published in Al-Ahram newspaper last week about the facts and investigations indicating that the size of the MB companies’ losses versus profits reached half a billion pounds. Using reverse calculation, he believes that the capital for these profits would be approximately LE 20 billion, however the investments cannot be calculated in a decisive manner, as the bourse does not classify on the basis of religion. He added that no companies are owned by groups but rather that dealings are undertaken on an individual manner, thus making it making it difficult to determine or confirm.

Prominent MB leader and professor in the faculty of economics and political science at Cairo University, Dr Abdul Hamid Ghazali said that if the investment climate is no longer encouraging then it will harm the development of capital and that closing down successful companies has a negative impact that will result in withdrawing capital in the Egyptian stock exchange, in addition to bureaucracy and the mismanagement of the economy. He added that, “There is no such thing as the economics of the Ikhwan” [Muslim Brotherhood]. Those who have been unjustly arrested are members of the organization; they do not finance it and are successful businessmen in their own right. Theirs is a success that is undeniable to everyone; they managed with their own work and effort to establish a deep presence in the Egyptian market in a number of different activities.” Al Ghazali pointed out that the companies that have been frozen and closed down belong to the individuals who own them and the organization is not connected to them and that talk of draining the sources caused confusion and wrongly affected personal capital. He held the policy that the state promotes to be the source and basis of corruption, stressing that the closure of such companies means the loss of jobs, adding to the problem of unemployment, which damages the Egyptian economy and afflicts it with a disaster that will have grave repercussions. He estimated the number of companies closed down by the state security authorities to be 25 over the past few years, emphasizing that the regime does not remedy the problems with the Egyptian economy and of unemployment and corruption but rather seeks to deny any opposition in order to maintain the status quo, which has been imposed for many years.

Al Ghazali said that the recent arrests of the businessmen affiliated to the MB has had no financial or organizational impact on the group in any way, emphasizing that the MB has become accustomed to this manner, confirming that these measures do not affect the financing of the group as the organization receives its funding from members via subscriptions. He stated that the regime precedes event, and practices what may be deemed pre-emptive strikes in an attempt to thwart the group’s activities by what has been economically and politically planned for the society, pointing out that the constitutional amendments that are presently being discussed and which the MB rejects pave the way for hereditary succession and that this was one of the reasons for the campaign against the organization. He affirmed that on a humanitarian level, the closure of these companies adversely affects the livelihood of the families of those employed in them, indicating that the regime will not benefit from these proceedings and that it will have no affect on the fate of the MB in its pursuit for what is in Egypt’s best interest.

According to the leftist party [Tagammu] leader Rifaat El-Said, the problem confronting the state is the organization’s excessive expenditure and that the state has begun to change its strategy by striking the MB’s economic entities and arresting the businessmen affiliated to the group, pointing out that the MB’s funding is connected to its secret apparatus. He added that the security’s move towards the Brotherhood was expected because when a banned group such as the MB is targeted, aiming for the jugular is an important matter, confirming that the latest proceedings will undoubtedly affect the group, but to what extent remains to be seen. El-Said believes that the state’s change in tactic is based upon the consideration that expenditure is one of the causes for spreading the Brotherhood’s call, and thus dealing with this situation has become inevitable.

Diaa Rashwan, expert on political Islam and extremist groups at the Al-Ahram Centre for Political and Strategic Studies (ACPSS) sees that there must be a distinction between the businessmen of MB and the business of the Brotherhood. He acknowledged that without a doubt there were businessmen such as Khairat al Shatir and Hassan Malik, and that there may exist empathizers and that the MB is spread throughout a wide range in society and that it is natural that various segments of society exist in this range, including businessmen. He deems the question that warrants posing is; “are there MB businesses, meaning are there companies and institutions acting on behalf of the group? This is a possible matter. And does the group’s organizational and structural configuration need that? Do the different levels within the group, from families and the public to the guidance bureau need the size of expenditure to match the scale of businesses imagined by some?” He continued, “In my opinion, it does not require a lot of money, and we must not regard the organization as if it were a sporting club or a political party because from its organizational structure, the Brotherhood operates in a decentralized manner, meaning that every level expends on their activities both individually and jointly. The businessmen do not finance the group in a systematic manner unless they are organizational members of the MB, in this sense; the volume of finance they contribute is not as big as has been rumored, which reflects a form of exaggeration.”

Rashwan was skeptical as to the impact that the arrested members may have on the MB’s status and said, “The situation with the fixed contributions, even if they differ in value in accordance with the capabilities of every member function to sustain the stability of development and business activities within the group without it being affected, proof of which was in 1995 and 1996 when the majority of the group’s shura council members and the heads of the guidance office, all of whom were tried before a military court had verdicts issued against them for imprisonment ranging from 3-5 years, yet, the MB preserved its strength and stability and did not collapse.”

In his analysis of the state’s strike on the MB’s political entities, in addition to the arrests, Rashwan believes that it is yet another attempt from its side to shake up the group after all other attempts had failed, both in arrests and tracking, from achieving the desired results. He said that from a theoretical standpoint the security policies against the Brotherhood had produced reverse effects and that perhaps resorting to this tactic stems from a security analysis to change the confrontational plan ¬especially since there is a conviction amongst some that the MB depends on expenditure for their prevalent presence and mobility. In addition, this approach surpasses the traditional methods in dealing with the group. Rashwan explained that “there is belief that this new policy could affect the group, however what we cannot ascertain now is the Brotherhood’s capability for replacement and decentralization in action, as opposed to what is ostensibly the principle of blind obedience that the group utilizes in operation, namely; its ability and overcome these situations and find alternative plans to deal with the new status quo. Everyone knows that the MB has the resilience and experience in dealing with the security’s strikes with immediate solutions under normal circumstances and the way it will deal with this crisis will reveal how capable the group is able to prevail.”

Security expert and Former Deputy of the Egyptian State Security, General Fouad Allam, has a different vision in that arresting the group’s businessmen is a qualitative shift in the state’s tactics towards dealing with the MB issue, deeming it unlikely that the latest proceedings will exert influence on the group’s financial situation, likewise its capability of striking them on an economic level. Allam stated that the closure of these companies will not impact the group because the MB, on a practical level, has surpassed the situation and stage where it would be possible to dry its financial sources by virtue of the members establishing huge projects in a number of countries, not only within Egypt, which enables them to transcend any economical strike regardless of its size. Allam said that the MB’s international relations coordinator and businessman, Youssef Nada, and a number of those affiliated to the MB abroad are managing multi-billion investments in a significant number of European and African countries – all of these finances at the group’s disposal at any given time, evincing proof of that by implicating Nada’s name in the latest al Azhar militias issue in Egypt, among those accused of money laundering. Allam believes that the arrests of the businessmen was not to serve an economic aim but rather came as a result of illegal acts as was evinced by the al Azhar militias investigations – which is the management of the economic purpose of money laundering, which comes from outside Egypt, from Nada and others in return for sending proceeds to finance the group.

The coming days alone will prove if the Muslim Brotherhood will be impacted by the proceedings against it and if the arrests of some of its major financers will be a prelude to bigger steps that seek to constrain and corner them.

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