In a significant regulatory shift, the Financial Regulatory Authority (FRA) of Egypt has introduced new rules governing merger, ownership and acquisition transactions within the non-banking financial sector. The move comes shortly after the landmark merger of Egyptian e-commerce platform MaxAB with Kenya’s Wasoko, a deal that has redefined Africa’s business-to-business (B2B) e-commerce landscape.
On Monday, the FRA Board of Directors issued Decision №178 of 2024, outlining a set of regulatory procedures aimed at enhancing transparency and competitiveness in non-banking financial markets. The rules, which focus on mergers, acquisitions, and market control, signal the growing intent in Egypt to regulate rapidly expanding industries, especially in the wake of significant transactions like the MaxAB-Wasoko merger.
A Focus on Streamlining and Market Control
The FRA’s new controls aim to improve the business environment by simplifying procedures for ownership and mergers, while also ensuring healthy competition within non-banking financial activities. Under the updated rules, companies must now seek the FRA’s approval if their mergers or acquisitions result in controlling more than 10% of the market. This 10% threshold acts as a safeguard, designed to prevent monopolistic practices and ensure market fairness.
For insurance and reinsurance companies, the new rules are even more stringent. Any ownership change exceeding specific thresholds — ranging from 10% to 90% — requires FRA Board approval. This tightening of oversight reflects Egypt’s desire to align its non-banking financial sector with international best practices, ensuring that investors, companies, and stakeholders operate within a well-regulated and competitive market.
In his statement, FRA Chairman Mohamed Farid explained that the new regulations were issued to accommodate recent legislative amendments and to replace earlier controls established in 2018. “We are keen to foster a competitive and transparent market that protects the rights of all stakeholders,” Farid noted. “Our role is to ensure that any mergers or acquisitions benefit the market without harming competition.”
MaxAB-Wasoko Merger Sparks Regulatory Review
The timing of these regulatory changes is noteworthy, coming just weeks after the finalization of the merger between Egypt’s MaxAB and Kenya’s Wasoko. The all-stock transaction, first announced in December 2023, marked Africa’s largest B2B e-commerce consolidation to date, combining two of the continent’s leading platforms into a singular powerhouse capable of reshaping the $600 billion informal retail sector.
The merger process, which took eight months to complete, involved the integration of 16 subsidiaries across several African countries. Daniel Yu, co-CEO of the new entity, emphasized the strategic nature of the merger, describing it as an evolution that would allow the companies to create a “multi-vertical ecosystem” for Africa’s informal retailers.
The FRA’s new controls, therefore, appear to be a response to deals of this magnitude, where significant market control is at stake. Founded in 2018 by Belal El-Megharbel and Mohamed Ben Halim, MaxAB is a B2B e-commerce platform that connects suppliers with underserved traditional retailers and offers a wide range of finance solutions. The founders launched MaxAB Payments in 2021, a fintech service that enables local merchants to accept payments for various services that their end customers may require. By implementing tighter merger and acquisition requirements, Egypt’s regulators are working to ensure that such large-scale consolidations benefit the wider economy without stifling competition.
New Regulatory Landscape for Non-Banking Financial Markets
The FRA’s new rules also introduce specific provisions regarding the approval process for non-banking financial companies seeking to merge. Notably, companies must now publish statements of their merger requests, allowing stakeholders and the public to submit comments within 15 days. The FRA will then review these requests, with a decision required within 45 days of application submission. The decision, once issued, is valid for six months, with the potential for extension if necessary.
In addition, companies listed on the Egyptian Stock Exchange that are involved in mergers or acquisitions must now notify the public through both daily newspapers and the stock exchange. This heightened transparency is intended to increase market confidence and provide investors with the opportunity to voice any concerns.
The new rules also simplify the process for non-banking financial companies, exempting certain transactions from requiring Board approval unless market control exceeds the 10% threshold. By streamlining these procedures, the FRA aims to reduce bureaucratic delays while ensuring that regulatory oversight remains robust.
With regulators in Egypt tightening their oversight on market control through these new rules, the future of merger and acquisition transactions in the non-banking financial sector will likely be shaped by a more structured and competitive environment, ensuring that such transactions foster long-term economic growth and innovation.