Egypt has an opportunity to employ the digital economy as an engine for growth and innovation and to address the shortcomings that the service and government system suffers from, in light of increasing investments in digital transformation.
Digital transformation will reduce corruption, bribery, mechanization and electronic connectivity of state actors will facilitate transaction procedures and speedy judgement in cases of litigation to achieve justice, all of which are catalysts to attract investment. Digital transformation will also contribute to restricting control and reorienting the use of state property to serve the transformation of digital life.
In this context, the Strategic Forum for Public Policies and Development Studies issues a research paper on analyzing the performance potential of e-commerce and virtual companies in Egypt, through the following axes:
First: The performance of e-commerce and virtual companies in Egypt and Africa
Second: The Egyptian government’s procedures to facilitate the procedures of virtual companies
Third: Ease of doing business in Egypt
Fourth: Ways to support and stimulate e-commerce and virtual companies in Egypt
The paper’s findings are as follows:
-The number of internet users in Egypt increased to about 75.7 million users in January 2022, compared to 21.9 million users in January 2012, and the number of mobile internet users reached 68.5 million users in June 2022, compared to 59.7 million users in June 2021, an increase of 14.9%.
-13.7% of internet users in Egypt use it to invest and carry out banking transactions via mobile applications on a monthly basis, while 15% use the internet to pay for services and utilities.
-Since 2022, the Ministry of Communications has started a program to host electronics manufacturers in Egypt, including Nokia and Vivo companies, which started manufacturing from Egypt.discussions are currently underway with Oppo and Xiaomi companies to open a factory in Egypt. talks are also being held with Samsung to expand its factory in Beni Suef.
-The value of government electronic payment and collection services through the electronic payment system amounted to about 3.7 trillion pounds (about 200 billion US dollars), while the value of revenues from taxes and customs amounted to about 1 trillion pounds.
-The “UNCTAD” report confirmed that Egypt is the first investment destination in the African continent for 2022, while the Rand Merchant Bank has identified the top 10 countries attractive for investment in Africa for 2021, and Egypt came in first place.
First: The performance of e-commerce and virtual companies in Egypt and Africa
-The virtual company relies on electronic employment, where the work is remote, and communication takes place between them by electronic means, and it has no fixed headquarters, and it bears no expenses when compared to the company’s physical expenses, and it saves a lot of money, time, effort, and buildings. A company can decide to shift from being a traditional company that operates according to the familiar and known ways to a virtual company that relies in everything it does on remote work.
Global e-commerce sales jumped to $26.7 trillion in 2019, up 4 percent from 2018, according to a report by the United Nations Trade and Development Agency (UNCTAD). The report indicated that online retail sales grew significantly in many countries, with the Republic of Korea recording the highest share of 25.9% in 2020, up from 20.8% in the previous year, as the volume of e-commerce amounted to about 30% of Global (GDP) in 2020.
about 16% of companies in the world work remotely at a rate of 100%, while 44% of companies do not allow working remotely, According to the latest statistics of “findstack.com ” specialized in e-commerce affairs for the year 2022,She emphasized that 77% of employees say they are more productive when working from home, and the average annual income for remote workers is $4,000 higher than other workers. And she pointed out that 85% of managers believe that having teams with remote workers will become the new norm, while 74% of workers say that having the option to work remotely would make them less likely to leave the company.
The number of Internet users in Egypt reached about 75.66 million( 71.9%), and the average number of hours Egyptians spend on the Internet is 8 hours, according to the latest statistics of the virtual reality platform “Horizon World”, affiliated with “Meta Virus.” The Foundation indicated that the number of Internet users In Egypt, it increased from 21.9 million users in January 2012 to 75.7 million users in January 2022, and that 13.7% of Internet users in Egypt invest and carry out banking transactions via mobile applications monthly, while 15% use the Internet to pay for services and utilities.
The number of mobile Internet users also reached 68.5 million users in June 2022, compared to 59.7 million users in June 2021, an increase of 14.9%, according to the data of the annual bulletin of telecommunications statistics issued by the Central Agency for Public Mobilization and Statistics in June 2023. The number of users reached Internet via ADSL reached about 10.5 million subscribers in June 2022 compared to 9.5 million subscribers in June 2021, an increase of about 10.7%.
Figure No. (1) shows the number of Internet users by mobile phone according to months
Source: Central Agency for Public Mobilization and Statistics
-Since 2022, the Ministry of Communications has started a program to host electronics manufacturers in Egypt, including Nokia and VIVO companies, which started manufacturing from Egypt, and discussions are currently underway with Oppo and Xiaomi companies to open a factory for them in Egypt, and discussions are also being held with Samsung to expand its factory In Beni Suef, noting that it was agreed with these companies that the proportion of the local component in the electronics industry be no less than 40%, and that the construction of about 2,800 mobile towers will be completed to improve mobile services provided to citizens, in addition to the construction of 1,000 mobile towers in the villages of a decent life. In accordance with international standards, with approvals from all concerned state authorities.
-About two years ago, the Egyptian Tax Authority took good steps in digital transformation systems, such as imposing the electronic bill system, which obliges every seller and merchant in Egypt to pay taxes online, allowing the state to monitor suspicious financing and money laundering plans.
The number of online shoppers in Africa is estimated at 21 million. The size of the e – commerce market in Africa is estimated at more than USD 60 billion in 2021, and the market is expected to witness an increase of USD 14.5 billion during the period (2025-2030), and it is expected to contribute to the creation of 3 million jobs on the continent by 2025.
-There are about 264 startups in the African continent working in the field of e-commerce and marketing and active in 23 countries, including the developed African countries Mauritius, Tunisia, South Africa, Kenya, Namibia, Botswana, Egypt and Algeria.
-Africa aims to increase online shopping through the implementation of the African Continental Free Trade Area (AfCFTA), which will benefit Egypt, as the agreement imposes on companies a 90% reduction in taxes imposed on products, free movement of funds and transactions, and seeks to form a customs union at the level of the African continent
Second: Facilitating the procedures of virtual companies by the Egyptian government
-The government is currently expanding to allow the establishment of virtual companies (online without the need for headquarters), to support the Egyptian economy, which is under pressure from the negative repercussions of the Russian – Ukrainian war.
-The government’s plan to confront the economic crisis was based on 5 main axes, starting with enhancing the value of the local product and industry, localizing foreign direct investments, exiting the state from public companies to provide opportunities for the private sector, restructuring public debt, a plan to advance the Egyptian capital market, and continuing to maintain the social dimension. The plan included government endeavors to facilitate online registration of startups, opening virtual businesses without the need for corporate headquarters, and amending legislation and laws to facilitate the establishment of one’s own companies. This contributes to the integration of the informal economy under the State’s formal umbrella, to be the best supporter of the local economy.
-The latest statistics of the Ministry of Finance regarding the digital transformation system in Egypt showed that the value of government e-payment and collection services through the system amounted to about 3.7 trillion pounds (about 200 billion US dollars). The value of revenues from taxes and customs reached about one trillion pounds, and the system indicated that the government succeeded in converting 96% of the electronic government cards to pay the dues of state workers to secured “Meeza” cards with contactless smart chips for workers in the state’s administrative apparatus. The first phase of the electronic bill system was implemented from October 2020 until the implementation of the sixth phase in February 2022.
-The opening of virtual companies supports the government’s directions to increase the share of the private sector in executed investments from 30% to 65% by increasing the number of companies present in the Egyptian market.
-The decision will also attract a number of foreign companies wishing to enter the Egyptian market, as this step facilitates many of the usual administrative procedures, foremost of which is the possibility of running business via the Internet without the need for residency. Start-ups costs renting their own headquarters and hiring workers.
-Egypt needs a technological infrastructure capable of meeting the expansion in the field of digital transformation, as an important and necessary step for the success of the ambitious plans and projects that it has begun to implement in all fields, including education and health projects.
Third: Ease of doing business in Egypt
-The “UNCTAD” report confirmed that Egypt is the first investment destination in the African continent for the year 2022, and the “Rand Merchant” bank identified the top 10 attractive countries for investment in Africa for the year 2021, with Egypt occupying the first place.
The ranking of countries is as follows: Egypt – Morocco – South Africa – Kenya – Rwanda – Ghana – Côte d’Ivoire – Nigeria – Ethiopia – Tunisia. There are several factors that contributed to the growth of the economy of the ten African countries that brought the report, including the sectors of manufacturing, construction, communication and information technology, retail trade, and banking and financial services.
-Egypt witnessed accelerated steps for advancement, development and modernization at all levels and in all parts of it, such as the road network that it established to raise the efficiency of transport and communication, which will have great economic effects on trade, industry and population movement within the country.
In an important step for the advancement of the country, the administrative capital was established to be the largest smart city in the world, where smart infrastructure works were implemented at the highest level of digital transformation tools, as well as modernizing work in government agencies and departments that will move to it.
-Major technology companies around the world are racing to develop smart robots for various uses or amazing technologies that simulate humans, and many of them were shown at international exhibitions such as Gitex, the world smartphone Conference, and others.
-There are huge disparities between and within countries in terms of penetration, affordability, and performance of digital services despite the digital revolution.
-While more than half of the world’s population currently has access to the Internet, the penetration rate does not exceed 15% in the least developed countries, or 1 person in 7, due to the high prices of Internet services through mobile phones or fixed lines.
-The reason for the improvement in Egypt’s ranking is due to the efforts made by the government, including the expansion of adopting modern technologies to provide Egypt’s digital services, the implementation of a huge project to develop the communications infrastructure with investments amounting to about $1.6 billion, and the execution of the second phase of the project in the current fiscal year with investments of $300 million, in addition to To create the legislative and legal environment that governs the uses of artificial intelligence by issuing the Personal Data Protection Law that regulates the relationship between the data owner and users.
Fourth: Ways to support and stimulate e-commerce and virtual companies in Egypt
The paper recommends developing clear policies on the use and availability of data, opening more technology centers to stimulate scientific research and development in the field of artificial intelligence, and working closely with SMEs, open source developers, and educational institutions to help them integrate artificial intelligence in various fields.
The proposals in more detail as follows:
1- It is necessary to spread the culture of digital innovation for all and achieve universal access to digital technologies, and provide data at affordable prices.
2- Adopting digital transformation by all ministries, which is an engine for the development process, especially for those who rely on electronic platforms.
3- providing assistance to start-up companies, as well as small and medium-sized enterprises in order to enhance competition and innovation.
4- The need to raise the efficiency of Telecom Egypt’s performance and enable it to establish a digital infrastructure that meets the needs of the state and society in digital transformation and major national projects such as the pre-university education development project.
5- Presenting a number of regional policies at the level of the African continent, within the framework of the continental free trade area, with the aim of integrating economies and implementing national digital strategies, which requires cooperation between African countries in various fields, including digital taxation, data security and the availability of information across borders.
