Starting a Business in Egypt
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Why Start A Business In Egypt?
As one of the oldest civilisations on the planet, Egypt is a country wrapped in near-eastern promise and ancient mysticism. No one quite knows what the hell went on there more than 4000 years ago, but whatever it was, it defies physics. Egyptians were the first real architects and construction workers - designing, building, blocking, chiselling and grouting their way to the Gods. Pharaoh foremen, Israelite stonemasons and hieroglyphic blueprints. Whatever was going on, it still can't be sussed with any unequivocal certainty, which makes you wonder if their ancient economy and corporate climate was just as advanced. Probably not. But either way, it is now.
After long structural, political and economic reform, Egypt has been clocking up some rather attractive boom miles. The Economic Tiger on the Nile is a much more fitting epithet now than a decade ago when it was first coined. Investment is diversifying and there is a justified air of confidence, not least because Egypt was named World's Top Performer of 2008 by the World Bank/ICF. The Tiger also vaunts free zones, a lucid registration process and antitrust legislation. It is a corporate pyramid of potential.
The government of Egypt has been bandying the slogan Egypt: Open For Business since the turn of the century. It was an ironic way of reminding investors that Egyptian enterprise wasn't as arid as its desert and lucrative opportunities were there for the taking. Investors heard, they went, they prospered. Egypt should now confidently change that motto to Business As Usual, because everything has been looking skywards ever since. Everybody wants a piece of the axiom.
But do be wary, though, the bureaucratic barometer runs rather high and it is still easy to get mummified by red tape. Business in Egypt can generally prove an assault-course of regulations, clearances, costs and arbitrary decision-making. Not enough to be discernibly detracting, though, and like most countries that are afflicted with the bureaucracy bug, things ultimately get done.
The Egyptian economy is a delicate balance of salt-of-the-Earth substance and corporate style. The points for potential run longer than the Nile, and for investors looking to establish there, it really is a case of drink deep or taste not. So, if Egypt looks like the perfect place to construct your pyramid to the entrepreneurial Gods, then read on to find out how to build your way to the stars.
What is the currency and exchange rate?
The currency used in Egypt is the Pound.
What is the population of Egypt?
The population of Egypt is approximately 80 million.
How is the weather/climate?
The weather in Cairo is consistently warm or hot. The nights are cool. Egypt only has two seasons: a very hot summer between May and October, and a mild winter from November to April. Cairo is arid, receiving on average of only about a centimetre of rain a year. However, it does have high humidity levels in summer. The city occasionally experiences dust storms brought by hot winds, characteristic of Egypt's climate. These usually occur in April.
What is the time difference?
The time in Egypt is GMT + 2.
What languages are spoken in Egypt?
The official language of Egypt is standard Arabic. Egyptian Arabic is the national and spoken language. English and French are also spoken widely, mainly in areas of business and erudition.
At nearly 80 million, Egypt is by far the biggest Arab country in terms of population. It sits in the heart of the Middle East and has a reasonably well-educated labour force. Egypt's market is traditionally connoted with agriculture, has become increasingly more eclectic than in previous years. Its fascinating historical monuments and staggering coral reefs have made tourism its foremost foreign exchange earner. It is also a major oil and gas producer, with natural gas production increasing expeditiously. The clothing and textile sector is the biggest industrial employer, and is also a form of lucrative foreign income. Other salient sectors include steel, cement, chemicals, pharmaceuticals, and light consumer goods. Agriculture, although lessening as a percentage of GDP, employs approximately 30% of the population.
As aforementioned, the economy has improved vastly due to reformist action. The reformers have impressively floated the Egyptian pound; overthrown the foreign exchange shortages and black market; lessened tariffs and streamlined the tariff structure by reducing the amount of rates and categories moved to reform the financial sector; welcomed legislation in parliament to ease the tax structure while lowering rates; decreased the amount of red tape required to conduct business, etc.
The economy is now increasing at a steady 6%, and the new regulations have encouraged much confidence and zeal within the business community.
Although the reformers have initiated reasonable impetus, red tape remains an obstacle of business, including a plethora of regulations and regulatory agencies, delays in clearing goods through customs, random decision-making, high-market entry transaction costs, and a generally unresponsive commercial court system.
A recent study has shown that the following sectors hold most prospect for UK companies:
- Education & Skills
- Ports & Logistics
- Water & Wastewater
And to reiterate, Egypt's primary exports are:
- Crude oil
- Petroleum products
- Metal products
And their predominant imports are:
- Machinery and equipment
- Wood products
What are the essentials to know?
Free Zones in Egypt
Egyptian Free Zones are also regulated by the Investment Law. For almost three decades, the government has been establishing and promoting free zones to capitalise on Egypt's strategic geographical location, seeking to attract foreign investors. Most goods and materials imported to a Free Zone project are not subject to import duties or customs regulations. Goods and materials exported from Egyptian Free Zones are also not subject to export duties or regulations.
Free Zone projects are subject to a duty of 1% of the value of goods entering or leaving the Free Zone, or to an annual duty of 1% of the annual value added in the project.
A company formed to operate in a Free Zone is exempt from all Egyptian income taxes for an unlimited period.
There are two types of Free Zones:
Public Free Zones: the Investment Authority has established public Free Zones in Alexandria, Suez, Port Said, and Nasr City. There is also a new Media City Free Zone, similar to that in Dubai.
- Alexandria Public free Zone
- Damietta Public Free Zone
- Ismailia Public Free Zone
- Keft Public Free Zone
- Media Production City Free Zone
- Nasr City Public Free Zone
- Port Said Public Free Zone
- Shebin El Kom Public Free Zone
- Suez Public Free Zone
Private Free Zones: these are established exclusively for a specific project or company.
Employment and workforce
Egypt has a good work ethic. It is also home to one of the continent's most qualified workforces. It boasts a relatively well-developed infrastructure to support it, too. Depending on your business in Egypt, it could be ideal. The cost of workers is generally low - approximately 15% of average UK wages - although, the quality of the workforce may be inconsistent.
The country has disappointingly been burdened: many of the highly-trained and erudite workers have opted to seek more fruitful work in neighbouring countries and overseas.
A recent piece of legislation was introduced in Egypt. It proposes some vast changes regarding employment, including flexibility in hiring and firing, permission for workers to strike, and the right to collective bargaining. Furthermore, it permits employers to end contracts or cut wages in circumstances such as closure or reduction of productivity. The law permits the creation of a national council for wages to be responsible for introducing a minimum wage. This new legislation will lead to a more agile labour system.
A contract that is fixed or long-term is permitted, but must be conducted in writing. If said contract exceeds five years, it is possible for an employee to request release with three months notice.
Renewable fixed-term contracts will become bogus if they, indeed, are not renewed or cancelled at their expiry. Otherwise, this contract can be ended by either employee or employer with a two- or three-month notice (depending on the length of service). Accordingly, resignations should be made in writing and the employee may overturn his or her decision within a week of the declaration.
Hours of work - The law outlines a working day as eight hours, and a working week as forty-eight hours. Under certain circumstances, this may be increased. Employees must be paid overtime for any such work.
Annual leave and holidays - Employees are entitled to annual paid leave of three weeks (twenty-one days) after a full year of service. This increases to one month (thirty days) after a decade of consecutive employment, regardless if it is with the same company or not. Also, employees of age fifty or over are eligible for thirty days' holiday, too.
Female employees are eligible for a fully paid maternity leave of 90 days.
Finally, the Egyptian government provides for thirteen paid public holidays, annually.
The relaxation of the economy in Egypt has led to a positive effect on the advertising sector. With it has come an expeditious growth of advertising agencies and a healthy capitalist culture of competition
Here are some of the favourable vehicles used for advertisements:
- Newspapers - literate Egyptians read with an enviable fervour
- Trade Press
- Radio - mainly for consumer goods
Etiquette and tips:
Social class is very apparent in Egypt and determines your access to power and position
The social class an Egyptian is born into dictates their everyday life and the opportunities available
There are three social classes: upper, middle, and lower
Status is defined more by family background than by absolute wealth
There is little social mobility
Business-wear is formal and conservative. As anywhere else, dress well if you want to make a good impression
Men should wear dark-coloured, conservative business suits, at least to the first meeting
Men should avoid wearing visible jewellery, especially around the face and neck
Women must be careful to cover themselves appropriately. Skirts and dresses should cover the knee and sleeves should cover most of the arm
Organisations that can assist with Starting a Business
Egyptian accountants and business consultants. Fathalla & co. is one of the fast growing Accounting, Tax, Auditing and consulting firms creates powerful business solutions in Egypt.
Legal Absolute provides a bespoke advisory service across a range of areas for international clients. We combine a fresh approach with professionalism and expertise, offering comprehensive, tailored services in today’s global and competitive market.
Simplified Global Payroll Companies with global employees often find that managing payroll in multiple countries is complicated - different systems, laws, and languages in each country, lack of reporting, and constantly changing laws and regulations each year. Trying to manage global payroll via fax and email with excel spreadsheets leads to data security issues, fines, and penalties for non-compliance. Blue Marble has solved global payroll challenges with cloud-based technology, aggregated reporting, and a hybrid service model in 135+ countries around the world.
Finding office space abroad poses one of the most difficult changes that many start-ups face. Location, costs, and transport all need to be considered. And, more crucially of all, what office will allow a new business to attract and retain the best staff?
PEO Worldwide is an international PEO offering employer of record, payroll, employee benefits management, HR and compliance services throughout the world.