Egypt’s wheat corruption scandal takes down embattled supply minister

Egypt’s Minister of Supply Khaled Hanafi has resigned amid the highest-profile corruption case since President Abdel Fattah al-Sisi came to power in 2014.

Hanafi’s resignation is the most senior-level fallout from a probe into whether millions of dollars intended to subsidise farmers were used to purchase wheat that did not exist.

Egypt’s supply ministry is in charge of a massive food subsidy programme and the main state grain buyer, the General Authority for Supply Commodities (GASC).

Parliamentarians who formed a fact-finding commission to investigate the fraud have said upwards of 2 million tonnes, or 40 per cent of the locally procured crop, may be missing.

The general prosecutor has ordered arrests, travel bans, and asset freezes for several private silo owners and others allegedly involved in the scandal.

“Experience has proven that being in a position of authority is no longer a picnic” Hanafi said as he announced his resignation on state television.

Egypt, the world’s largest importer of wheat, has been mired in controversy over whether much of the roughly 5 million tonnes of grain the government said it procured in this year’s harvest exists only on paper, the result of local suppliers falsifying receipts to boost government payments.

If Egypt’s local wheat procurement figures were misrepresented, it may have to spend more on foreign wheat purchases to meet local demand - even as it faces a dollar shortage that has sapped its ability to import.

“It’s important that whoever comes next knows that the minister is not above accountability and will always be monitored and under the spotlight,” Nader Noureldin, a former supply ministry advisor, said.

While Hanafi has not been accused of directly profiting from misallocated subsidies, parliamentarians, industry officials, and media commentators have in recent weeks pinned blame for the crisis squarely on his shoulders.

Huge losses

“Hanafi started very strong but unfortunately he trusted the wrong people who ran the ministry for their own benefit which led to huge loss of the subsidy,” said Waleed Diab, Managing Director of Egyptian Millers Company, one of the country’s largest private mills.

The prospect of hundreds of millions of dollars in squandered government subsidies comes as Egypt gears up for a raft of austerity measures, including various subsidy cuts agreed to as part of a $12 billion IMF programme that could bring pain for its poorest people.

Pressure has been mounting on the minister, who was appointed in 2014, ever since earlier this year when parliament began investigating whether a bumper wheat crop -- nearly 5 million tonnes delivered by farmers versus 3-3.5 million normally procured -- may be the result of foul play.

In recent weeks parliament’s wheat commission has captured the attention of the Egyptian public, with MPs making highly publicised site visits to private silos suspected of fraud, arriving unannounced to tally missing wheat before reporting their findings to the local press.