Accelerating issuing of laws will help improve business environment, attract investments

Alia Stouhi
7 Min Read
Chairman of the The Egyptian Financial Supervisory Authority (EFSA) Sherif Samy Public domain

The Egyptian Financial Supervisory Authority (EFSA) has almost completed its preparation of laws and regulation amendments of the past three years, which have been sent to ministers from various ministries.

Amendments to the executive regulations of the capital market law were completed, besides the micro-finance law and the executive regulations of the moveable collateral law.

The legislation of the capital market law, amendment to insurance law No.10, amendments to the executive regulations of the Insurance Law, and the leasing and factoring law are all awaiting the approval of the Ministry of Investment to be sent to the cabinet, the State Council and then the parliament for passage.

What is the role of EFSA in the legislative reform?

There are a number of laws and regulations that are being worked on that do not belong to the EFSA; however, there are some fundamental issues that need to be put up for community discussion to take some points into consideration, especially as they are general laws governing all companies and will subsequently affect the activity of the non-banking financial sector.

The EFSA is currently preparing for the competition protection and monopolistic practices law, which includes the need for prior approval for any sort of acquisitions. The authority met with a group from the Egyptian Competition Authority (ECA) to discuss the law and clarify the extent of the difference in sectors.

The nature of sectors differ in terms of the maximum limit proposed by the ECA, which is EGP 250m. This might be a large amount for some sectors, but it represents a very small value for the banking sector and oil companies. There are entities and authorities that already oversee acquisitions in some sectors, such as the EFSA which oversees non-bank financial activities, and the Central Bank of Egypt (CBE) which oversees banks.

The bankruptcy law, which was approved by the cabinet without presenting it for community discussion, has some aspects that must be consulted by all sides. The law intervenes in determining the responsibilities of board members of large economic sectors. It also addresses the nature of transactions among companies that hold and manage accounts between depositors and owners of interests and the industrial and commercial companies, in which the risks of trading on third party funds decrease.

Do you think that presenting legislations for community discussion with related parties is important?

Laws must be put up for societal debate through sessions to find out the reasons some articles are included and the because of the possibility of finding better solutions. This should be done so that legislation does not harm business.

We are trying to communicate with the authorities based on the preparation of various laws so that we can discuss them before they are presented to the parliament.

The EFSA posted many demands to the Ministry of Investment two years ago for amendments to the Companies Law, which is the parent law for the establishment of companies in Egypt.

On the other hand, the EFSA is awaiting the issuance of a large number of legislations that were sent to the government by the end of 2016. Legislations include the leasing and factoring law, the capital market law—which was sent a year ago—as well as amendments to the current Insurance Law, and insurance law No. 10.

The EFSA completed the legislation that increases the efficiency of the control processes, regulates the establishment of companies, develops financial tools, and organises the unorganised markets. We are waiting for the legislation to be passed in order to enhance the efficiency of the capital market system and to improve the ranking of Egypt’s Business Performance Index. A delegation from the EFSA visited those who are in charge of preparing the index in the US to brief them on the latest updates in the legislation and business performance improvement file.

There are some financial tools that have not been added to the market, such as short selling and futures, which are included in the capital market draft law. The EFSA can activate the rest without the need for a legislative amendment—if the amendment’s requirements are available.

We included the futures exchange in the capital market draft law amendments and passing the law will allow the interested parties to establish futures exchange.

What is the situation of index funds so far and what are the latest updates?

In light of the presence of a real demand on Egyptian stocks, I wonder why Egyptian indicators are not registered in foreign exchange to be traded in foreign exchange.

Bold decisions are taken and foreign investors, especially in the financial services sector, have shown a great interest. The current challenge is to take advantage of this interest by attracting investment for projects.

The general climate has become more encouraging, which is appetising to investors following the decline of asset prices after the Egyptian pound’s flotation.

What do you think about offering state-owned companies in the stock exchange in the coming period?

The government’s planned initial public offerings (IPOs) must attract foreign institutions interested in the Egyptian capital market, so their restructuring plans, share ratios, and IPO sizes must be clear. The IPOs will definitely be affected by the consequence of the pound’s flotation, and the IPOs that are less than EGP 1.5bn-2bn require the offered company’s value to be not less than EGP 5bn.

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