As the global economy faces a significant downturn, funds in Egypt are looking to bolster the start-up ecosystem to ensure innovative firms are supported.
In light of social distancing, technology and digital firms are becoming increasingly instrumental in ensuring essential goods and services remain available in the country, as is the case elsewhere in the world.
Egypt’s digital start-ups were in a good position to respond to the pandemic. According to a January 2020 report from data platform MAGNiTT, Egypt was responsible for the highest number of start-up financing deals in the MENA region last year, with 141 deals (25% of the total) attracting $98.6m in funds.
While the pandemic creates significant headwinds across the economy, several funds are seeking to build on the strong track record of the digital sector.
Falak, Egypt’s largest start-up accelerator, is to allocate LE1m ($63,510) to ensure firms are able to weather the current crisis, and are provided with technical and strategic support to leverage any business opportunities that may result from the pandemic.
In particular, Falak is targeting start-ups in the fields of health and insurance technology, financial technology (fintech), logistics, 3D printing, remote work solutions and e-learning. These have been identified as central services during the Covid-19 shutdown period.
Parallel to this, on April 14 Mohamed Okasha, co-founder of Egyptian fintech firm Fawry, launched a $25m fintech fund designed to bolster Egypt’s finance-orientated start-up ecosystem. Although the fund was planned before the pandemic, its scope and focus have been adjusted in response to the health crisis, in the conviction that fintech will emerge from the crisis as a leading segment of the economy.
“Technology is having a significant impact on how businesses operate. For example, fintech has disrupted Egypt’s banking sector, and will continue doing so despite Covid-19,” Mervat Soltan, chairperson of Export Development Bank of Egypt, told OBG.
“With 100% mobile penetration – 60% of which is via smartphone – there is a real opportunity for technology to help address broader economic issues, such as the informal economy and challenges to financial inclusion,” she added.
Meanwhile, in early April Cairo’s Seedspace entrepreneur hub announced the winners of its SeekNotHide hackathon, which invited local start-ups to address the challenges facing the digital economy due to Covid-19.
In first place was Netsahem, which designs payment solutions to enable Egypt’s NGOs to manage their finances online.
Ongoing coronavirus measures
As of April 19, Egypt had 3144 confirmed cases of Covid-19 and 239 deaths as a result of the virus.
The government’s partial lockdown – which began on March 25 for an initial period of two weeks – remains in place, but is slated to be lifted on April 23, the first day of Ramadan.
The government is using modelling in an attempt to predict a trajectory for the containment of the virus. Estimates place the likelihood that containment will be achieved by June at 20%, by September at 50% and by December at 30%.
Although the death rate for Egypt remains relatively high compared to the global average, it decreased last week from 7.5% to 7.3%, according to the latest figures from the Ministry of Health and Population.
While an economic downturn looks probable, Egypt looks set to be the only country in the MENA region to not go into recession in 2020, according to the IMF. The organisation forecasts the country’s economy will grow by 2% this year.
On the policy front, officials from supranational organisations have commented that Egypt is well positioned to cope with the crisis. This is a result of the policy measures implemented in March and its ongoing, IMF-backed economic reform programme, which began in 2016.
In a virtual meeting with African leaders last week, António Guterres, secretary-general of the UN, emphasised that Egypt had “reduced taxation for industries, postponed taxation on agricultural land and expanded its social safety net programme”.