Al-Ahram Weekly Online   24 - 30 August 2006
Issue No. 809
Economy
 
Published in Cairo by AL-AHRAM established in 1875

Sticky bread issues

Tensions between the government and bakery owners are fermenting over a new initiative to improve the quality of subsidised bread. Mona El-Fiqi samples the debate

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In an attempt to overcome the endless problems pertaining to subsidised bread, namely its bad quality and absence from some governorates, the Ministry of Social Solidarity launched a new initiative for subsidised bread. But bakers have turned down the initiative and threatened to shut down their bakeries.

In February, the government decided to raise the quality of subsidised bread and take measures to ensure that subsidised flour is used to make bread for low-income families, rather than being sold on the black market. Two weeks ago, the Minister of Social Solidarity Ali Moselhi announced that a new contract regulating bread production is ready to be signed by bakeries which produce subsidised baladi bread.

In response, the General Division of Bakery Owners at the Egyptian Federation for the Chambers of Commerce (EFCC) sent Prime Minister Ahmed Nazif a memo rejecting the contract, on the basis that it carries severe penalties for violations. While the ministry and bakery owners in EFCC had consulted on drafting the contract, the latter claim that the government added harsh penalties without the approval of the division.

Moselhi countered that the new contract is non-obligatory, so bakery owners can choose to decline it and continue working according to the current system. In fact, he suggested that some bakeries should continue in their old ways in order for consumers to compare between the quality of bread produced in both systems.

Hashem Mohamed, a civil servant, believes that the new contract might lead to better quality subsidised bread, and that the government has every right to regulate bread production.

The government has been subsidising bread since 1945, and today 16,500 bakeries across the country benefit from the programme. The market price for flour is estimated at LE1,250 per tonne, but the government provides bakeries with subsidised flour at LE250 per tonne; a loaf of bread costs the government 17 piastres, while it is sold to consumers at five piastres. Furthermore, Nazif issued a decree recently that an additional LE1 billion will be allocated to improve the quality of subsidised bread. This raises the bread subsidy to LE9 billion annually, almost 10 per cent of the government's total LE100 billion budget for subsidies every year.

The new contract regulates the rights and duties of all three parties responsible for producing subsidised bread, namely bakeries, mills and the Commodities Authority which is responsible for wheat delivery. In the contract, the Ministry of Social Solidarity will pay LE5 as a bonus for each bag of flour (a bag weighs 100kg) used to make bread. Owners of bakeries are quick to complain about the quality of the subsidised flour they receive from the mills, saying that this is the cause for bad quality bread; the new contract gives the owner the right to refuse the flour if it is sub-standard. But along with the incentives, there are the penalties.

Hassan Abdel-Aal, an owner of a bakery in Giza, said that the new contract will cause him to lose a lot of money since it states that if a loaf of bread weighs less than 130g, he will pay a fine calculated according to the market price of flour. "This means I will pay a lot of fines I cannot afford if my workers make a mistake in weighing the dough," Abdel-Aal complained. But according to the contract, if the loaf is only 10 per cent below the legal weight it will not be penalised.

The value of the fine is not the only issue of contention. In the contract, if three fines are filed against a bakery in one year, its license will be canceled. Bakery owners prefer the number to go up to five fines before the license is revoked.

Although the Ministry of Social Solidarity claimed that 66 per cent of bakeries have accepted the new contract, bakery owners in Cairo and Giza governorates say otherwise. Mohamed Ali Abu Shouk, an owner of a bakery in Cairo, asserted that "most owners did not sign; and I will never sign even if I have to close the bakery."

Moselhi admitted that the penalties are relatively harsh, but that this is for the benefit of consumers. According to him, a bakery would average LE140 in profits every day if it uses 10 bags of flour daily, which is a reasonable income.

Contracts will be valid as soon as the owner signs it, but monitoring will begin in September. A committee of five will be responsible for supervising the application of the new system, and includes representatives from the ministries of social solidarity, health, agriculture, the Federation of Chambers of Commerce and consumer protection groups. A hotline will also be operational to receive consumer complaints about he quality of bread, whether made under the new contract or old system.

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