How To Start A Business in Egypt
Doing business in Egypt
Ancient Egypt – the cradle of civilization as it is fondly called is an African country that is located in the Northern part of Africa and it is the largest country in both North Africa and the Arab world. Cairo which happens to be the largest city is the capital and seat of power of Egypt. Egypt is a regional power and also the 3rd largest country in Africa with a population of about 87 Million people.
Aside from Cairo which happens to be the largest city in Egypt, Alexandra and Nile Delta are also major cities in Egypt. Although Arabic is the official language of Egypt, but English language is also widely spoken all over Egypt. The economy of Egypt revolves around natural gas ,petroleum, coal, services and tourism. No doubt the tourism sector contributes over 10 billion US dollars to the economy of Egypt annually and it employs a good percentage of the labor force in Egypt.
Notable tourists destination in Egypt are the Great Pyramid, River Nile, Egyptian National Military Museum, The Grand Egyptian Museum, The 6thOctober Panorama, The Egypt Museum and The Red Sea et al. much more than its historical sites, tourists visits Egypt for both Religious and Medical purposes also. Now let us quickly look through the top 10 business opportunities that are available to investors in Egypt;
Starting a business in Egypt? Want to register your company quickly?
ECP Version of Procedures for Starting a Capital Company in Egypt
Given the assumption of starting a limited liability company, the entrepreneur would register the company at General Authority for Investment and Free Zones (GAFI), under law 159 (year 1981).
Procedure 1: Trade Name Clearance Certificate (done by client)
Time to complete (days): 1
Cost to complete: no cost
Comment: Certificate is issued by the Commercial Registry. With the new CRA system by Sakhr the certificate will actually be issued. The current CRA system only checks the availability of the name but it does not reserve it. The new system will enable us to correctly implement the Trade Name law. The law says that the name should be unique so the CRA should be checking against all registered companies. They do not do that now, and they do not reserve a name. The new system will reserve the name for 30 days – time enough to register the company.
Procedure 2 Obtain a certificate from an authorized bank (done by client)
Time to complete (days): 1
Cost to complete: EGP 300
Comment:The Bank of Alexandria branch at the General Authority for Free Zones and Investment (GAFI)
issues and delivers the certificate in 1–2 days. The bank certificate cost between EGP 200 to EGP
500, depending on the bank.
Procedure 3 Submit documents to the Companies Establishment Department, under GAFI (done by client)
Time to complete (days): 1
Cost to complete: see comment
Comment:Department of Companies is the old name. It is now the Companies Establishment Department under General Authority for Investment and Free Zones (GAFI)
The founder deposits the company documents at the reception desk, where they are reviewed immediately by a lawyer. The documents to be reviewed are:
1. Trade Name Clearance Certificate
2. Original Bank Certificate
3. Power of Attorney from all the founders
4. Founders IDs
5. Certified copy of auditor’s listing on Registry of Accountant and Auditors Association
6. Application to GAFI
Notes: Security Clearance for foreigners is now part of the WB assumption (100% local owners); WB report indicates “preliminary consent of General Authority of Manufacturing” this became Industrial Development Authority (IDA) via Presidential Decree in 2005. This consent is only required for manufacturers.
The GAFI lawyer reviews the documents and issues an Articles of Association. This is the official contract of the company.
A GAFI employee calculates the fees associated with the company's establishment.
Fees for company establishment:
- Notary public fee: 0.25% of capital ( minimum of EGP 10 and a maximum of EGP 1,000).
- Establishment fees: 0.1% of capital (minimum of EGP 100 and maximum of EGP 1,000 according to Article 17 (d) of the Companies Law).
- Commercial Syndicate fee: EGP 125 (for capital less than or equal to EGP 500,000) or EGP 250
( for capital more than EGP 500,000).
- Publication fee: EGP 150 (for a limited liability company in Arabic) or EGP 300 (for a limited
Liability company in Arabic and English).
- Chamber of Commerce fees: 0.2% of capital (minimum of EGP 24 and maximum of EGP 2,000)
in addition to EGP 29 for the issuance of operation certificate.
- Commercial registration: EGP 51.
- Issuance of operation certificate: EGP 29.
You pay the amount on the receipt to Bank cashier. GAFI stamps the Articles of Association.
Procedure 4 Notarize company’s contract (done by client)
Time to complete(days): 1
Cost to complete: 0.25% of capital (minimum of EGP 10 and a maximum of EGP 1,000).
Comment: Public Notary reviews the documents again, particularly the Power of Attorney, then notarizes theArticles of Association.
Procedure 5 Obtain Chamber of Commerce Certificate (done by GAFI)
Time to complete(days): 1
Cost to complete: 0.2% of capital (minimum of EGP 24 and maximum of EGP 2,000)
Comment: GAFI employee will obtain the Chamber of Commerce Certificate (because the company is under Law 159) on behalf of the client and provide it to the client. The fee is collected in step 2.
Procedure 6 Issuance the notification of incorporation (done by GAFI)
Time to complete (days):1
Cost to complete:no charge
Comment:When the articles of association are submitted, the competent authority must ratify them and issue a decree approving the establishment of the company. This decree is issued within 24 hours.
Procedure 7 Commercial Registry Certification (done by client)
Time to complete (days):1
Cost to complete:
Comment: At the Commercial Registry office the lawyer (on behalf of the applicant) submits application to Commercial Registry along with the Chamber of Commerce certificate, the notification from GAFI and the original Article of Association. The Commercial Registry provides the original Commercial Registry certificate.
After the lapse of 15 days the company assumes legal responsibility and judicial personality. Within the 15 days if the competent authority has no objection, the Department of Companies is thereafter responsible for publishing the notice of incorporation in the Investment Gazette at the company's expense. (Note: This is true for companies under law 159. Under Law 8 the company acquires legal personality on the same day of registration.)
Procedure 8 Register for taxes (done by client)
Time to complete (days):1-5 days (source website)
Cost to complete:no charge
Comment: Upon incorporation, the company can complete tax registration and obtain the tax cardat the one-stop shop’s tax counter. Upon obtaining the card, the company may choose to register for sales tax, provided that they have started production. Companies are obliged to register for sales tax only once they reach at least EGP 54,000 in sales for industrial activities and EGP 150,000 in sales for commercial activities.
The required documents include:
- the articles of association (this should not be required since the key document is now the commercial registry certificate)
- the powers of attorney
- the bank signature authentication to be issued to the appropriate person by the manager having the power to sign on behalf of the company
- the tax card
- an original extract from the company’s commercial register (certificate)
and the original copy of the company’s lease agreement for its premises.
A new reform took place recently that will further reduce the time for this procedure a
result of automation of the tax office at the OSS and the tax authority.
Note: according to our research neither the bank signature authentication nor the company’s lease agreement is required. Source: Website of Sales Tax Authority. What source does the bank have? Also, the Tax Authority requires a list of branches of the company and their activities/purpose.
Procedure 9 Register employees with the National Authority of Social Insurance (done by client)
Time to complete (days):1-5 days (source Customer Service Rep at NASI)
Cost to complete:no charge
Comment: Social insurance provides compensation for disability, retirement (pension), unemployment, and work-related injuries. By law, employers are required to subscribe to the social insurance system.
Otherwise, they may be subject to sanctions. The employer must submit a fully completed, authority-issued application (Nos. 1 and 2) and the following documents to the competent authority’s office:
- Employer’s lease agreement for company premises
- Employer’s tax card
- Employee’s identification card and birth certificate (copy)
- Employee’s and employer’s graduation certificate
- A Commercial Registry certificate
National Authority of Social Insurance issues a social insurance ID number which is unique.
Note: NASI requires copy of Commercial Registry Certificate. This is not listed in the DB. Customer Service rep says the process takes 1 day to 1 week. And she says the applications are No. 1 and No. 7, not No. 2.
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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.
Economic Overview
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
Railways
Water & Wastewater
And to reiterate, Egypt's primary exports are:
Crude oil
Petroleum products
Cotton
Textiles
Metal products
Chemicals
And their predominant imports are:
Machinery and equipment
Foodstuffs
Chemicals
Wood products
Fuels
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 pro
ductivity. 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.
Advertising
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
Periodicals
Magazines
Trade Press
Radio - mainly for consumer goods
Television
Cinema
Billboards
Etiquette and tips:
Sociality:
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
Meetings:
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
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