Egypt’s Head of the General Authority for Investments and Free Zones (GAFI), Hossam Heiba, announced plans on October 1 to introduce a “silver license” for startups in the local market to support businesses amid ongoing economic challenges. While specific details were not provided during Heiba’s statement last week, Business Monthly reached out to GAFI to understand the terms and conditions of this license.
According to GAFI, the silver license will be similar to the golden license provided to investors. Its primary purpose will be to offer startups a streamlined process for handling all paperwork related to their businesses through a single window.
Supporting Egypt’s startups
GAFI aims to launch this license before the end of 2023 as part of its efforts to bolster startups and support the national economy, particularly in reducing unemployment rates in the country.
“It is a positive and sensible step. This will aid in keeping these businesses within the local market because currently, Gulf countries are enticing Egyptian startups to either relocate or expand there,” according to Mohamed Okasha, managing partner at the venture capital firm DisrupTech Ventures, in response to the announcement.
“Startups are highly beneficial for Egypt right now as they generate numerous job opportunities, attract foreign currency, and align with the state’s digital transformation strategy,” he added.
Okasha also emphasized that the Egyptian government has a strong inclination to support these businesses specifically. He revealed that in September, the Financial Regulatory Authority (FRA) established a clear distinction between startups and small and medium-sized enterprises (SMEs).
The FRA now defines startups as newly established companies with a short operating history and a high potential for growth and innovation. In September, the FRA issued a new resolution amending the Egyptian standards for the financial evaluation of businesses to align with the nature of startups and facilitate their access to necessary financing for growth, expansion, and business development. The resolution emphasized that startups encounter significant challenges in securing financing, particularly in the early stages before they generate revenues and sales.
“Startups are already suffering numerous challenges, particularly the lack of funds as well as the early stages of starting their business. The issuance of the silver license will be helpful and stimulative for them,” Okasha affirmed.
Meanwhile, Ahmed Elzaher, CEO of the Information Technology Industry Development Agency (ITIDA), informed Business Monthly that Egypt boasts a vibrant startup ecosystem, serving as a significant catalyst for the country’s economic expansion.
ITIDA, the executive IT entity under the Ministry of Communications and Information Technology, plays a pivotal role in supporting and promoting this ecosystem.
Elzaher highlighted that startups consistently contribute to Egypt’s digital transformation by introducing innovative solutions that positively impact the lives of millions of Egyptians.
Resilient growth
In 2022, Egyptian startups demonstrated remarkable resilience despite global and local economic challenges. Venture capital investment in these startups continued its upward trajectory for the fifth consecutive year, even in the face of a worldwide shortage of venture capital funding. Egypt is the leader in the Middle East and Africa (MEA) region when it comes to the number of venture capital deals in startups.
According to Magnitt, the verified-data platform tracking venture capital investments across emerging markets, Egyptian startups acquired the largest number of deals in the MENA region, with 160 deals. It also came in second place on the African continent, whether in the volume of investment or the number of financing deals in emerging companies.
Egypt has a strategy aimed at boosting the startup ecosystem. This tendency crystallized in June when Egyptian President Abdel Fattah El-Sisi announced five-year tax exemptions for these businesses.
Moreover, Egypt’s Prime Minister Moustafa Madbouly instructed the cabinet in June to create a permanent unit assigned to proposing policies, laws, and regulations that ensure the growth and prosperity of startups in Egypt.
Egypt came in second, following the UAE, in September in terms of new startup deals with 7 deals closed out of 32 deals sealed during the month. Yet, Egypt ranked third in September among the top VC receivers in the region, after the UAE and Saudi Arabia, with total investments valued at $2.6 million, according to the latest report issued by the entrepreneurship investment vehicle Wamda.
