Egypt

Country Profile

This section provides a brief overview of Egypt’s political environment. As investors are concerned about corruption, governance and political and security risk, these themes are also addressed in this section.

Introduction

Egypt is situated on the north eastern corner of Africa[1], on the Mediterranean Sea, between Libya on the west, the Gaza Strip (Palestine) on the east, and Sudan to the south. The country’s land area totals 1,001,450 sq. km.[2]

Egypt has a climate of hot, dry summers (27 to 32)[3] with moderate winters[4] (13 to 21) and unpredictable rainfall. February-March and October-November are the best months for tourists.[5] The country can experience natural disasters of periodic droughts, frequent earthquakes, flash floods, landslides, hot driving windstorms, dust storms and sandstorms.[6]

Most of Egypt’s terrain is arid desert that covers approximately 96% of the country’s surface.[7] The Nile, the longest river in the world, cuts through Egypt from the south to north for approximately 6,693 km.[8] The Nile Valley and its delta, a small area of 38,850 sq. km is fertile and cultivated.[9]

The country gained its independence on 28 February 1922[10], but British influence remained significant until mid-1950s.[11] After the assassination of President Anwar Al-Sadat in 1981, Vice President Hosni Mubarak was elected president and ruled for almost 30 years. During Mubarak’s reign, an Islamist group called the Muslim Brotherhood (founded in 1928) became extremely influential.[12]

In 2011, an uprising of protestors overthrew Egypt’s autocratic President Mubarak[13] aiming to bring about democratic transformation.[14] Following 18 days of protests, President Mubarak stepped down. In June 2012, a Muslim Brotherhood candidate, Mohammed Morsi, narrowly won the freely contested presidential election.[15] However, Morsi’s presidency was short-lived, and in 2013 the army, led by Chief Abdul Fatah al-Sisi, deposed him and used violence to stop his supporters’ protests.[16] In May 2014, al-Sisi won a new presidential election[17], and in June 2014 was sworn in as Egypt’s fifth head of state.[18]

Towards the end of 2013, the government classified the Muslim Brotherhood as a terrorist organisation and anyone suspected of being part of this organisation was detained.[19] Since the July 2013 coup Muslim Brotherhood supporters were subject to a widespread crackdown. They and other political opponents and activists have routinely been subjected to unwarranted detention, torture, and forced disappearances and extrajudicial killings.[20]

Egypt was classified as ‘not free’ in the Freedom in the World Report 2017, with poor scores on freedom, civil liberties and political rights. This is a deterioration from 2013, when the country was classified ‘partly free’.[21] Under the current government, new legislation that lessens civil liberties as well as infringements on the rights of human rights defenders ‘threaten to effectively eradicate independent civil society’, according to the watchdog Human Rights Watch.[22]

Egypt has many different ethnic groups. Roughly 99% of the population is of eastern hamitic stock (Egyptians, Bedouins, and Berbers), and the remaining 1% are of Nubian, Greek, Armenian, and other European origins (primarily Italian and French).[23] The country’s official language is Arabic, but English and French are understood by the educated.[24] The overwhelming majority of Egyptians (94%) are Muslim, mostly Sunni, and the remaining 6% are Coptic Christian.[25]

This country has small reserves of natural resources of petroleum, natural gas, iron ore, phosphates, manganese, limestone, gypsum, talc, asbestos, lead, rare earth elements, and zinc.[26] Agriculture, tourism and cash remittances from Egyptians working abroad (mainly in Saudi Arabia and the Gulf countries) form the foundation of Egypt’s economy. Due in part to ongoing political turmoil in the country, the government has not been able to address the problems created by rapid population growth in combination with limited arable land, and this has had a negative impact on the country’s     economy.[27] Only 3.6% of the country’s land area is suitable for agriculture.[28]

Business culture

Doing business in any foreign country requires sensitivity towards the specific cultural norms of that society, and Egypt is no different. Below are some guidelines for doing business in Egypt:

Business hours

  • Business hours are typically from 7:30 to 14:30, Sunday to Thursday, with some businesses open on Friday mornings.[29]

Greetings

  • Men greeting men – a light handshake with the right hand is commonly used during initial meetings.
  • Women greeting women – A simple nod of acknowledgment is a sign of greeting, but women can also greet each with a handshake.
  • Greetings between men and women entail a slight bow of the head with a greeting of “Salaam Aleikum”, and in some circumstances, a handshake is acceptable.

Personal space

  • Egyptians will stand or sit near each other when conversing. Personal space tends to be less when members of the same sex are conversing, whereas an arm’s length distance or more must be maintained when two unrelated Egyptians of the opposite sex engage in conversations.
  • Touching during conversations is not usually acceptable unless the conversation is between relatives or close friends.
  • Conversations between men and women involve very little or no touching.

Business attire

  • Men generally wear dark coloured suits and ties, but in most industries it is becoming more acceptable to wear casual business attire.
  • Egyptian women generally wear conservative attire and avoid low necklines and sleeveless attire. Pants are acceptable in many situations, but dresses or skirts must fall below the knee and shirts are preferably long-sleeved.

Views on time

  • There is no expectation for punctuality, whether it be a meeting or services provided to the public.
  • Trains and planes run on schedule, the subway has regular time intervals, with buses generally being the most unreliable form of transport.

Meetings

  • The most senior individuals are greeted first, following in order of positions and titles.
  • It is expected that one engage in conversations of small talk for roughly five to ten minutes.
  • It is recommended that the agenda of the business meeting is dictated by the host, who also opens and closes the meeting.[30]

Governance and corruption

Ibrahim Index of African Governance

The Ibrahim Index of African Governance (IIAG) was established in 2007 and is the most comprehensive collection of quantitative data on governance in Africa. The IIAG provides a framework for citizens, governments, institutions and businesses to assess the delivery of public goods and services and policy outcomes across Africa.

This index is based on the following variables:[31]

  1. Safety and Rule of Law
  2. Participation and Human Rights
  3. Sustainable Economic Opportunity
  4. Human Development

Egypt ranked 24th out of 54 African countries and 3rd out of the six countries in Northern Africa on the 2016 Index.[32]

Egypt’s 2016 score of 51.0 out of 100 in 2016 is substantially higher than its 2000 score of 46.3. The country’s 2016 score is slightly higher than the African average score of 50.0. Between 2000 and 2016, the largest improvement was in the country’s score on sustainable economic opportunity, which rose from a score of 47.7 to 57.3.

The country’s performance on participation and human rights increased from 25.0 to 32.2 between 2000 and 2016; while its score on human development climbed from 54.2 to 61.9.

The country’s score on safety and rule of law deteriorated significantly from 58.5 to 52.3, indicating that the protection of citizens from internal and external threats to peace has declined. The country received its lowest score for safety and rule of law in 2013 (41.5) – coinciding with the removal of President Morsi and large scale crackdown on and incarceration of Muslim Brotherhood supporters. See Table 1.1 for the IIAG rankings and scores for Egypt (24th), Mauritius (1st), South Africa (6th) and the African average.

Table 1.1: Ibrahim Index of African Governance: Egypt, Mauritius, South Africa and Africa on average (2000 & 2016), score out of 100

  Egypt Mauritius South Africa Africa
Indicator 2000 2016 2000 2016 2000 2016 2000 2016
Rank out of 54 (2016)* 24 1 6
Safety & rule of law 58.5 52.3 83.1 80.8 73.6 67.1 54.2 52.1
Participation and human rights 25.0 32.2 74.1 76.0 70.0 71.4 45.5 50.0
Sustainable economic opportunity 47.7 57.3 67.6 79.0 62.4 68.4 39.7 42.9
Human Development 54.2 61.9 78.4 83.7 68.4 70.6 47.3 55.0
Overall 46.3 51.0 75.8 79.9 68.6 69.4 46.7 50.0

Sources: Ibrahim Foundation, 2015[33]; Mo Ibrahim Foundation, 2016[34]
Note: *2016 ranking based on 2015 data

The Corruption Perceptions Index, compiled by Transparency International, measures the perceived levels of public sector corruption in countries worldwide. Based on expert opinions, countries are scored from 0 (highly corrupt) to 100 (very clean). Some countries score well, but no country scores a perfect 100.

Egypt’s score increased by 10 points between 2010 and 2016, nonetheless scoring only 34 out of 100 in 2016. The country ranks 108th out of 176 countries, lower than Botswana (35th), Rwanda (50th), Namibia (53rd), and South Africa (64th) and several other African countries in 2016, but higher than Nigeria (136th) and Libya (170th). Denmark and New Zealand both ranked first with a score of 90, but more than two thirds of the 176 countries scored below 50.[35] (See Table 1.2 below.)

Table 1.2: Corruption Perceptions Index for Egypt and other selected countries (2010 and 2015)

Country 2010 Ranking
(out of 178)
2010 Score
(out of 100)
2016 Ranking
(out of 176)
2016 Score
(out of 100)
Botswana 33 58 35 60
Rwanda 66 40 50 54
Namibia 56 44 53 52
South Africa 54 45 64 45
Egypt 98 31 108 34
Tanzania 116 27 116 32
Nigeria 134 24 136 28
DRC 164 20 156 21
Libya 144 22 170 14
Somalia 178 11 176 10

Sources:Transparency International, 2010[36]; Transparency International, 2017[37]

Risk profile and terrorism

According to risk consultancy Control Risks, Egypt’s political environment presents persistent and serious challenges for business operations, resulting in it being identified as a country with a high political risk.[38] The impact of political risk on companies can include changes to fiscal or licence conditions, imposition of currency controls, judicial insecurity, high-level corruption, reputational damage, expropriation and nationalisation, contract uncertainty and international sanctions.[39]

Egypt’s security risk is rated medium, which indicates that some aspects of the security environment pose challenges to business, with some possibly being serious.[40]

The largest security threat to Egypt currently stems from Islamic militants operating from their base in the country’s Sinai region. In late 2014 an armed group in the Sinai region launched an insurgency and pledged allegiance to the Islamic State. The group subsequently orchestrated several attacks on military and police outposts, killing several hundred police and soldiers.[41] Egypt’s prosecutor general was killed in a car-bomb attack in Cairo in mid-2015, and Islamists carried out several attacks on prominent tourist destinations in early 2016.[42] In late 2016 and early 2017, Islamic State militants carried out multiple attacks on Egypt’s Coptic Christian communities, including a bomb attack at a church in Cairo that killed 25.[43]

On 9 April 2017, during the celebration of Palm Sunday, ISIS bombed two Coptic churches.[44] The first attack was at a church in the city of Tanta in Nile Delta, which killed 27 people and injured at least 78. The second took place at a church in Alexandria, and left at least 17 people dead and 48 injured.[45] In response to the bombings, the government launched a three-month state of emergency.[46]

Correspondingly, Egypt ranks 9th out of 163 countries on the Global Terrorism Index 2016, with a score of 7.238 out of 10. Moreover, the country’s ranking has worsened from 13th (out 162 countries) in 2015. The Global Terrorism Index (GTI) is a comprehensive study that analyses the impact of terrorism on more than 160 countries. The index aggregates the most authoritative data source on terrorism today, the Global Terrorism Database, which records details on terrorist incidents into a ranking of countries according to the negative impact of terrorism. The higher the rank on the index, the higher the impact of terrorism in that country.[47]

Egypt experiences a lower impact of terrorism than Nigeria, which is ranked 3rd, but the impact of terrorism in Egypt is worse than in Libya (ranked 10th), and far worse than in Algeria (42nd), South Africa (52nd), and Morocco (95th).

Table 1.3: Global Terrorism Index scores for Egypt and other selected countries (2015–2016)

Country 2015 2016
GTI score Ranking/162 GTI score Ranking/163
Iraq 10.0 1 9.960 1
Afghanistan 9.233 2 9.444 2
Nigeria 9.213 3 9.314 3
Egypt 6.813 13 7.328 9
Libya 7.290 9 7.283 10
Algeria 4.750 34 4.282 42
South Africa 4.231 38 3.531 52
Morocco 1.446 92 0.892 95

Sources: Institute for Economics and Peace, 2015[48]; Institute for Economics and Peace, 2016[49]
Note: GTI scores are on a scale of 1-10, where 10 represents the highest impact of terrorism, and 1 represents no impact of terrorism

Implications,challenges and recommendations

Overview

The 2016 Ibrahim Index of African Governance shows that between 2000 and 2016 Egypt’s governance has improved,but there is still ample opportunity for further improvement, as the country still scores lower than many other African countries. The country performs worst on participation and human rights, achieving a meagre score of 32.2 out of a possible 100.

On the Corruption Perceptions Index 2017, Egypt ranks 108th (out of 176 countries)[50], a significant decline from 88th (out of 168 countries) in 2015.[51] Alarmingly, within a one-year period, perceptions of corruption in the country have increased significantly.

Alarmingly, Egypt was ranked in the top 10 out of 163 countries for the impact of terrorism, a decline in rankings since 2015. The security situation is precarious, with attacks by the Islamic insurgents in the Sinai region reaching into other parts of the country including popular tourist destinations and the country’s capital.

For policymakers

The Egyptian government should urgently seek to make changes that would improve governance, as the country ranks 24th out of 54 African countries on the Ibrahim Index of African governance several years after the mass uprisings of 2011 that called for political opening. The protection of human rights and increasing political participation should take priority in this regard.

Thus far, the government has demonstrated little will to tackle rising perceptions of corruption and, in some cases, has actively thwarted efforts to uncover it. In 2016 President Al-Sisi fired the head of Egypt’s top auditing body after he announced that government corruption had cost the country $68 billion over four years. Shortly thereafter, the government began prosecuting the former top auditor for disturbing the public peace and spreading false news.[52] Perceptions of corruption are harmful to the country’s economic recovery, as they make it more difficult to conduct business and deter investors. The government should make it a priority to expose and remove corrupt officials.

The tourism industry has been negatively impacted by terrorist attacks. This is concerning as this industry has always been a significant contributor to Egypt’s economy. The security situation is also likely to hamper business and deter investors. The government should become stricter on border control to ensure that people entering the country have legal citizenship or relevant visas. Since the country’s score on safety and rule of law (in the 2016 Ibrahim Index of African Governance) deteriorated significantly, the government needs to improve on its security to protect citizens from internal and external threats to peace.

For HR practitioners

Employers can contribute to fostering a culture of ethics and sound corporate governance. Orientation and training programmes could be implemented to instil sound corporate values, which should become part of the DNA of a company. Companies should also develop strategies on how to deal with government corruption, so as to avoid engaging in corrupt activities themselves and perpetuating the problem.

Understanding Egypt’s cultural context is also important for conducting business there. Companies should take care to be informed on the prevailing business culture. In addition, companies operating in Egypt should also implement sufficient frameworks for the protection of their employees given the unstable security situation in the country.

  • Country Profile
  • Introduction
  • Broad Economic Indicators
  • Currency and Exchange Rate
  • Competitiveness and Ease of Doing Business
  • Foreign Investment and Largest Companies
  • Foreign Aid
  • Country Strategic Framework
  • Summary of Economic Conditions
  • Implications, Challenges and Recommendations
  • Population
  • Living Standards and Poverty Levels
  • Healthcare
  • Implications, Challenges and Recommendations
  • Qualifications Profile of the Population and Workforce
  • Levels of Schooling and Basic Education
  • Technical and Vocational Education and Training
  • Tertiary Education
  • Innovation in Egypt
  • Implications, Challenges and Recommendations
  • Labour Force
  • Employment by Sector
  • Employment by Skill Level
  • Employment by Occupation
  • Labour Productivity
  • Unemployment and Job Creation
  • Expatriates, Immigrants and the Egyptian Diaspora
  • Wage and Salary Trends and Social Insurance
  • Industrial Relations Framework
  • Labour Market Efficiency
  • The Fourth Industrial Revolution
  • Implications, Challenges and Recommendations

Country Profile

  • Country Profile

Need Assistance?

We created this platform with you in mind. Every aspect and all the information were meticulously planned and designed to offer you the highest quality content and a pleasant user experience.

If you need assistance or have suggestions, please let us know.

+27 11 706 6009

+27 11 706 6009

info@hcresearchportal.co.za