Egypt Techpadi: Growth and Investment

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About a decade or two ago, when anyone thinks of tech innovations or related issues in whatever form on the African continent, the countries that readily come to mind are Kenya, Nigeria, and South Africa due to their fast-growing start-up ecosystems.

However, the story is no longer the same as the new kid on the bloc, Egypt, is growing so fast in the area of tech development that it is now a force to reckon with and has joined the league of the big three countries in the continent to form the “big four”.

Over the years, Egypt has grown to become a dynamic startup ecosystem coming up with various innovative digital solutions which have created more opportunities for other businesses to thrive.

Egypt now enjoys the seamless services of various tech platforms which provide essential services that are boosting the country’s track records in the tech start-up space.

Data from a 2021 report from a leading African tech research platform, Disrupt Africa, showed that Egypt is now home to the fourth-largest ecosystem of start-ups in Africa, with 562 active tech start-ups spread across the cities.

The report has it that 94% of the start-ups are based in Cairo, with Alexandria accounting for 3.6% and the remainder in cities such as Assuit, Qena, and Mansoura.

With rising numbers of incubators and accelerators spread across the country, access to capital funds, and a vibrant and growing ecosystem, Egypt is attaining the level of a tech powerhouse.

The country’s strategic location and international trade network have contributed to the growth of the tech start-ups making it an ideal platform for companies doing business in the MENA region and Africa as a whole.

With a young population of 20 million tech-savvy consumers, Cairo provides a perfect testbed for innovation and an attractive market for scalability.

In growing its tech ecosystem, Egypt, also enjoys the conscious efforts of its tech-savvy young population whose entrepreneurial mind-set is rising as the days go by.

The rise of Egypt as one of Africa’s notable tech giants has also been aided in part by the government’s efforts and initiatives especially the regulatory reforms implemented over the last few years. Most of the initiatives have promoted an enabling business environment that has led to the growth of many start-ups with various innovations which cut across diverse fields such as fintech, eHealth, logistics, ed-tech, e-commerce, and retail start-ups.

Despite its spread across various sectors, the country’s ecosystem is mainly driven by e-commerce and retail tech which accounts for 20.8 percent of 562 active start-ups in the market followed by fintech with 11.6%, eHealth at 9.4% then several others jostling with the remaining percentage.

Another report by Disrupt Africa on the Egyptian Start-up Ecosystem Report 2021 also showed that over the last five years, Egypt has not only risen in terms of the number of start-ups but is also attracting huge investments to the sector both locally and internationally through the launch of several new venture capital (VC) funds.

For the past few years, there has been a steady rise in investments in start-ups across Egypt. The African Tech Startups Funding Report showed that in 2019,
Egyptian start-ups raised $85m and $141m in 2020.

In 2021, Venture capital investments in Egypt more than tripled annually to $445 million with expectations for a rise to over $1 billion this year, according to a report by the American University in Cairo.

Records also have it that the Egyptian VC ecosystem has grown at a compound annual growth rate of 109 per cent between 2015 and 2021, making it the largest recipient of deployed capital in the MENA region.

Some of the recorded VC investments in Egypt in the last year include Algebra Ventures’ $90million fund which targeted startups in fintech, eHealth, logistics, and agritech.

Also in April 2021, Sawari Ventures closed a $71m fund for start-ups in three Northern African countries with Egypt taking the lead followed by Morocco and Tunisia while in November of the same year, US-based VC Opener and ICT services provider, FCBenya Group signed an agreement to launch a $50m VC to support investment in Egypt and other Middle Eastern and African markets.

Magnitt’s Venture Report for Egypt 2022 said investments such as those listed above and many more pushed the Egyptian ecosystem to growth in 2021 as venture capital (VC) provided to start-ups rose to 176 per cent year-on-year to hit record-high VC funding.

According to the report, the number of investment deals concluded in the Egyptian start-up ecosystem in 2021 was the highest ever in the ecosystem, witnessing three consecutive half-yearly periods of growth in deal flow and funding activity.

The number of investors in the Egyptian start-up ecosystem also rose to an all-time high to grow by 65 per cent year-on-year in 2021.

As continuity is key, Egypt has been able to sustain most of its huge investments in the tech sector as seen in the first five months of 2022 when Egyptian start-ups attracted $380m in financing.

The tech sector has also benefited from the government’s initiatives, part of which prioritized the tech and start-up sector under Egypt’s National Structural Reform Program 2021-2024, a development that has contributed to the country’s position as a fast-rising hub for start-up investments.

The government has increased funding and investments in the tech sector to establish a strategic partnership that will further develop the country’s ecosystem.

Data by the Egyptian Ministry of International Cooperation showed that in 2021, Egypt Ventures which is the government’s arm to support start-ups and entrepreneurship in the country provided direct and indirect investments worth 92 million Egyptian pounds to support their growth.

Earlier this year, the Egyptian government in collaboration with the World Bank launched a $50 million venture capital programme to finance new and existing investment funds.

The programme seeks to support young innovators, and help them establish tech-focused projects and apps that facilitate peoples’ needs.

It also aims to develop incubators and business accelerators that support the growth of promising start-ups as well as fitment in funds that desire to expand into the larger African market.

Through government initiatives, development partners also invest in Egypt’s tech ecosystem to aid development.

Just recently, the UK government’s development finance institution (DFI), British International Investment (BII), announced its plan to invest US$100 million in Egyptian startups over its current strategy period.

In mid-2021, Elena Panova, UN Resident Coordinator for Egypt, said that together with the UNDP, the development agency “supported the establishment of 233 tech start-ups, providing support to 247 tech MSMEs at various stages of growth.

At the policy level, the Egyptian Ministry of Communications and Information Technology is working with the International Telecommunication Union, ITU, on gap analysis for the digital innovation ecosystem in Egypt aimed at building a da digital society that can integrate tech into almost aspect of life.

With all of these, one certain thing is that Egypt is striving to become one of the most advanced tech ecosystems in Africa.

As it pursues this all-important goal, critical factors that most keep working for it are sustainability of investment funding and resiliency even in the face of challenges because the tech world is evolving with new creations and innovations every day hence it must be prepared to compete favourably to achieve it’s set goals.

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