The Interpreneur survey: Understanding mid-market business trends in Egypt

Although we recently reported Egypt’s hyperinflation, it is expected that the economy will grow by over 4% in 2024, due in part to public spending, lucrative real estate deals in the early part of the year and a robust loan strategy from the IMF.

To understand how this landscape is affecting mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.

We have analysed the Egyptian data to get a better understanding of what drives business owners when expanding abroad.

Global business trends: Do Egyptian business leaders believe more businesses will expand overseas in the next 12 months?

Overseas business expansion is widely expected to increase by Egyptian CEOs

Egypt is in the top five most confident countries that believe there will be a significant increase in businesses expanding overseas, out of the 14 that were surveyed.

Which markets do Egyptian businesses prefer to expand into?

Western Europe is Egypt’s number one choice for global expansion

Over half (53%) of respondents said their business would consider expanding to Western Europe.

• 41% said their business would consider expanding in the Middle East. This was the second highest score for the region, underlining the close ties between them.
• 36% said their business would consider expanding to North America. This is just over half of the score indicated by Chinese respondents.
  • Only 9% would consider expanding to South Asia or Australia/New Zealand.

What makes a country more attractive to Egyptian businesses looking to expand globally?

Alignment with long-term growth strategy primary attractor for Egyptian business leaders

Almost half (47%) of respondents said that one of the most attractive traits for international expansion is alignment with long-term growth strategy (e.g. regional investment into specific industries)

This was followed by:
• Future economic growth prospects – 46%
• Government support (e.g. grants, incubators, and mentorship programs) – 46%. This was the second highest score for this factor, indicating Egyptian business owners were most likely to be tempted by this to invest in a country.
• Tech infrastructure and digitalisation – 45%

What motivates Egyptian interpreneurs to expand internationally?

Over half (54%) of respondents said their business was primarily motivated to expand internationally by market growth opportunities such as accessing new customer segments.

• 39% were motivated by the possibility of cost optimisation, such as leveraging lower production/resource costs and
• 37% said that they were motivated by getting a competitive advantage, like gaining a foothold in new markets before rivals motivated their business international expansion.

What benefits do Egyptian firms see from global expansion?

63% of respondents said one of the biggest benefits their business has found following international expansion was increased sales and revenue, in line with the global results.

Other significant benefits were:

• Increased profitability- 58%
• Enhanced brand awareness and reputation- 44%
• Stronger strategic positioning and competitive advantage- 41%

What are the biggest international expansion challenges in 2024 for Egyptian businesses?

Handling economic volatility key for Egyptian interpreneurs

44% said that one of the biggest challenges faced by businesses during international expansion was managing economic volatility (e.g. currency fluctuations, inflation and or low growth). This is likely a reflection of the hyperinflation and economic uncertainty after the Egyptian pound was devalued in 2016.

Other significant challenges were:

• Finding the right local partners (e.g. building reliable and trustworthy relationships)- 43%
• Navigating global tax regulation (e.g. transfer pricing, double taxation, VAT)- 43%
• Adapting logistics and supply chain issues (e.g. managing international shipping, distribution, and communication)- 41%

Risk: What do Egyptian CEOs think are the biggest risks to global business expansion in 2024?

How much of a risk do the following pose to your business’s international expansion or planned international expansion?

Financial market volatility number one risk to Egyptian CEOs expanding internationally

42% of respondents felt financial market and foreign exchange volatility poses a disruptive or significant risk to their business’s international expansion or planned expansion.

41% felt that Economic slowdown or recession poses a disruptive or significant risk and an additional 41% felt this risk from escalating geopolitical tensions and instability, no doubt influenced by the recent unrest in Gaza.

Private Equity vs Venture Capital: Which is the preferred international expansion funding source for Egyptian businesses?

Venture capital funding mid-market Egyptian firms’ international expansion.

Egyptian business owners had the highest score of all 14 countries for venture capital or private equity, the second highest scores for management buyout and crowdfunding, highlighting Egypt’s innovation when it comes to raising capital in a background of poor currency exchange rate. 43% reported using/ considering using private investors (including HNWIs) for international expansion.

Other common sources of growth capital were:

• Employee equity schemes- 41%
• Management buyout- 41%

Understanding global tax: Is the C-suite ready for a global tax threshold?

Despite identifying global tax as a challenge when expanding internationally, Egyptian confidence high in taxation expertise

98% confidence, with almost half extremely confident in understanding global tax rules is an optimistic picture. Egypt is the second highest score behind the US indicating that respondents are extremely confident.

• 56% of respondent are extremely confident that they understand the global international tax rules that govern multinational businesses –they have a deep understanding of global tax rules and their implications for multinational businesses.
• 39% are confident – they have a good grasp of key principles and can navigate common scenarios but may seek external guidance for complex situations.
• Only 5% are not very confident, with limited understanding and rely heavily on external advisors for guidance and analysis
• No respondents said that they were not confident at all, relying entirely on external advisors for their advice, guidance, and/or decision-making. Eight other countries out of the 14 also agreed with this point, showing a confidence globally in tax comprehension.

The growing importance of ESG for Egyptian investors and interpreneurs

The importance of ESG considerations:

Egyptian interpreneurs consider ESG in global expansion

The majority (94%) do/would consider ESG practices when considering counties or regions to expand into:

• 38% of respondents said that their business does or would prioritise ESG
  • 27% do/would value it, but it wouldn’t be a priority
  • 29% do/would if it didn’t interfere with their other priorities.
• Only 6% don’t / wouldn’t consider ESG practices.

The benefits of AI in international business operations

Egyptian businesses confident about the use of AI in global operations

Most respondents (97%) agree that they feel prepared to harness the benefits of AI in global business operations in the next 2 years. A response that was shared globally, with a score of 90% and only 3% disagreeing.