The rise of VC, PE in Egypt and the role of fund administration
Egyptian fund managers expressed confidence about the local stock market, boosting the financial market’s status despite expectations of a higher inflation rate this year. This was the result of a March 2022 survey by the Egyptian paper newspaper Daily News Egypt, when it asked asset managers and industry experts about their top concerns this year in terms of the stock market, global fund, trends and assets and investments. In addition, survey participants expected the Central Bank to pursue a stringent monetary policy. Enter: fund administration in Egypt in the middle of a booming fund market.
Booming fund market in Egypt and the role of fund administration
Before the COVID-19 outbreak, Egypt was one of the fastest expanding emerging markets. The Egyptian government was making progress on economic reforms, and while there were still many challenges ahead, Egypt’s investment climate was showing an upward trend. And then the Russian-Ukrainian war broke out again earlier this year, which significantly affected the global financial markets and resulted in inflation and supply chain disruption.
However, Egypt still has potential for companies looking to expand beyond the developed, mature markets of the northern hemisphere since it was one of the few economies in the world that continued to expand throughout the pandemic, along with China.
The result of the abovementioned survey indicates that the participants are expecting a surge in the local investment funds sector. This also shows a greater need for fund administration in Egypt to offload back-office jobs and compliance and regulatory burdens for PC & VE managers in the emerging market.
Aside from this, asset managers also expressed their views on the Egyptian Exchange (EGX) and the future of interest rates.
The Egyptian Exchange
The Egyptian Exchange is an established international stock exchange. In Egypt, exchanges in major cities Cairo and Alexandria are both regulated by the same board of directors and use the same trading, clearing and settlement processes. They want to create a high-quality market to serve their customers by using the advanced tech and establishing fair markets with great transparency and efficiency.
Trading volumes on the Egyptian Exchange increased over the last year, reaching EGP 1.003 trillion (including shares, bonds, and OTC deals), up from EGP 689.9 billion in 2020.
Possibilities for investment
In Egypt, the Arab world’s most populous country, there has been a largely unnoticed but significant trend in entrepreneurship. Much of this has occurred in the country’s two major economic centres, Cairo and Alexandria, but there are also indications of a broader and more inclusive trend.
Asset managers enumerated dozens of opportunities to invest in 2022, on top of stocks and cash funds, new initial public offerings (IPOs) such as the Macro Group, investment in gold, infrastructure, agriculture, the banking sector, non-financial services, health, fintech, startups, heavy industry, real estate, food and long-term investments.
Significant challenges to overcome
Since 2016, Egypt’s government has been implementing the Economic Reform Program that includes financial and monetary reforms with the goal of achieving rapid and sustainable growth rates as well as inclusive development. This program has provided radical solutions to structural economic problems that have plagued the Egyptian economy for many years.
Many more multinational corporations are interested in setting up operations in Egypt because of the numerous opportunities offered by the country and the government’s reform agenda. However, there are still significant barriers to doing business in the country.
Despite the recent reforms, the country’s tax and regulatory framework is still far more complicated than that of other countries in the region. Egypt, for example, has a variety of taxation systems, and businesses must file separate filings for corporation, property and stamp duty taxes.
Labour laws and the social security system of the country are also complicated, and dealings with the administrative authorities are further hampered by the fact that Arabic is the sole language used in official government portals for tax, social insurance, customs and the commercial register.
Companies considering entering Egypt would be wise to obtain assistance from experienced, local experts who provide top-notch fund administration services before commencing on their venture, as mistakes made early in the business startup process are difficult, expensive and time-consuming to correct once the firm is up and running.
Bolder Group in Egypt
Bolder Group is committed to tapping emerging markets that show promising investment opportunities. We found an immense opportunity in Egypt. This year alone, Bolder Group has gone to the Arabic country various times. Last May 30, we organised a seminar for VC and PE fund managers on Legal Structuring via the Benelux. A mix of industry experts went to talk about startups, corporations and fund administration in Egypt.
Egypt has a thriving fund market that requires fund administration services. Bolder Group has a range of fund administration solutions for managers and capitalists with businesses in Egypt. We are well-versed in closed-end structures, their finite life cycles and the specific legal and reporting requirements. We work with private equity fund clients from investment to exit, assisting them with a variety of fund administration and support services such as portfolio accounting, NAV production, SPV accounting, capital calls/distributions, Waterfall, carried interest calculations, AML/KYC compliance, payment services, and audit & tax support.
Let’s talk about your need for a fund administration service in Egypt. Get in touch with us.