In an attempt to reduce bureaucratic friction and make smaller-scale investments in the country’s startups more accessible, Egypt ‘s Financial Regulatory Authority (FRA), chaired by Dr. Mohamed Farid, recently issued Decision №303 of 2024. This amendment modifies the rules laid out in Decision №94 of 2018, particularly concerning transactions involving securities not listed on the Egyptian Stock Exchange (EGX). While this move simplifies some aspects of investing, foreign and local investors alike may find that not all challenges have been resolved.
Threshold Raised: From EGP 20 Million to EGP 60 Million
The FRA’s decision raises the minimum value of unlisted securities transactions requiring regulatory approval from EGP 20 million to EGP 60 million. For deals below this new threshold — equivalent to approximately $1.9 million at the current exchange rate — investors no longer need to obtain the FRA’s direct sign-off. Instead, they can follow simplified procedures to report the transaction to the EGX, significantly reducing delays and paperwork for smaller deals.
This change effectively acknowledges that smaller transactions, previously subject to the same level of scrutiny as larger ones, were overburdening both regulators and investors. By focusing its oversight on transactions exceeding EGP 60 million, the FRA aims to free up resources and facilitate smoother operations for smaller deals.
To put this in perspective, foreign investors now face fewer procedural hoops for modest investments. For example, if an investor wants to purchase $500,000 worth of shares in an unlisted Egyptian company, the process now involves fewer approvals and faster execution. However, transactions exceeding the EGP 60 million threshold remain subject to the same stringent review, including mandatory non-objection certificates from the FRA.
New Flexibilities in Payment Procedures
The amendments also give brokerage firms more autonomy in facilitating transactions under EGP 60 million. Brokerage companies are now allowed to process settlements directly, under their responsibility, provided they ensure that the purchasing party has paid the agreed amount for the securities. However, this flexibility comes with a caveat: brokers must still secure a non-objection certificate from the FRA to finalize the deal.
For larger transactions, the FRA has extended the allowable time for depositing funds in an Egyptian bank from one month to two months. This adjustment gives investors more time to arrange financing or move funds — a practical nod to the realities of cross-border transactions. For funds deposited earlier than two months before the transaction request, investors must seek explicit FRA approval to use these deposits for the deal.
Foreign investors need to understand that all payments for securities transactions, regardless of size, must flow through Egyptian banks. This requirement applies to both listed and unlisted joint-stock companies (the most common business structure in Egypt).
Here’s how the process works:
- For Smaller Transactions: If the transaction value is under EGP 60 million, investors can deposit the purchase price directly into the seller’s bank account or use an escrow arrangement with an Egyptian bank. In both cases, documentation confirming payment must be submitted to the EGX.
- For Larger Transactions: Transactions exceeding EGP 60 million require additional scrutiny. Investors must deposit the funds in the broker’s Egyptian bank account. Once the FRA approves the transaction, the broker transfers the funds to the seller’s account. Alternatively, funds can be deposited directly into the seller’s account, provided a bank certificate confirms the deposit was specifically for the securities purchase.
There are exceptions to the cash deposit requirement, such as share transfers between family members or during corporate restructuring. These exceptions, however, still require FRA approval.
While these regulatory changes aim to make smaller deals less cumbersome, they occur against a backdrop of economic challenges. Egypt’s annual urban inflation rate has eased slightly, falling to 24.1% in December 2024 from 25.5% the previous month. Food and non-alcoholic beverage prices, a major inflation driver, rose by 20.3%, the slowest rate since early 2022. However, inflation remains far above the central bank’s target of 5–9%, reflecting broader economic instability.
For investors, this high inflation translates into ongoing concerns about currency devaluation and purchasing power, both of which complicate long-term investment planning. While the FRA’s new rules streamline procedural hurdles, they cannot address these macroeconomic headwinds.
Egypt remains one of Africa’s top destinations for startup funding, attracting $400 million in 2024, according to a report by The Big Deal. This places it third behind Kenya ($638 million) and Nigeria ($410 million). The FRA’s reforms are undoubtedly a step toward improving Egypt’s appeal, particularly for early-stage and angel investors. Yet, they do little to resolve challenges related to scaling and attracting mega-deals — an area where Egypt continues to lag its regional peers.
While the FRA’s decision to raise the oversight threshold is a welcome development, it’s not a silver bullet. Investors looking at Egypt still face a labyrinth of banking regulations and economic uncertainty. Simplified procedures for smaller deals are a positive signal, but larger transactions remain bogged down by bureaucratic complexities.