Egypt moves to tame lawless e-commerce sector

Egypt's e-commerce sector greatly expanded over the course of 2017. According to a statement issued by the United Nations Conference on Trade and Development (UNCTAD) Dec. 27, Egypt expects to double its e-commerce by 2020 under a national strategy by the Egyptian Ministry of Communications and Information Technology and UNCTAD.

The ministry is working to promote electronic transactions in rural areas and improve high-speed broadband services there. The joint effort aims to modernize Egypt’s Post Authority, bolster the legal and regulatory framework for e-commerce, build trust in online payments, encourage government employees to use e-procurement and strengthen training and apprenticeships in areas like online store management, digital marketing and data analytics.

Ali al-Kayal, a member of the parliament’s Industry Committee, submitted a bill Dec. 10 to regulate e-commerce transactions. Kayal told Al-Monitor over the phone, “All of the parliament’s committees agree on the need for a bill to protect the state's lost funds and impose taxes on electronic transactions that can amount to billions of [Egyptian] pounds.”

He added, “The bill also aims to protect citizens from fraudulent transactions,” saying the legislation will enable consumers to recover their money in case of fraud.

“The bill sets up mechanisms to protect consumers. Under the bill, online sellers must provide their name, address, contact information and commercial registration data to prove that they are registered in the trade registry. They will also have to show the governmental entity they are supervised by so that this entity can be addressed in the event of any [issues],” he continued.

Hisham Safwat, CEO of the online shopping portal Jumia Egypt, told Al-Monitor that only 2% of Egypt's e-commerce market is regulated. This tiny slice includes companies such as his own that are based on Egyptian territory and registered with the General Authority For Investment. The rest are unregulated, he said, and are not subject to taxation and concerns regarding advertising and sales over Facebook and Instagram.

Safwat explained, “The draft law submitted by Kayal targets entities that do not have headquarters on Egyptian territory or are not registered with the [authority]," saying that the law will create a way to tax foreign companies' sales in Egypt.

Safwat added that Egypt's first e-commerce platform started in 2007 with the launch of Nefsak.com.

According to a statement supplied by Jumia’s CEO, Black Friday purchases on Jumia — Egypt's leading e-commerce website, where about 250 Egyptian companies promote their products — reached 50,000 in 2015 and 150,000 in 2016. The statement read that 64% of 2017's online sales were of smartphones. Electronics as a category ranked first, followed by men’s and women’s clothing, while children's products ranked third.

Safwat added that e-commerce in Egypt witnessed rapid growth in 2017 both in terms of volume of sales and the number of dealers. He said the value of electronic transactions during 2017 is estimated at $4 billion to $5 billion.

He said the government’s austerity measures, which included reducing subsidies for commodities and floating the Egyptian currency, had no negative impact on the expansion of e-commerce. “The online prices are lower than the traditional [brick-and-mortar] market prices due to the lack of overhead. Also, discounts abound online,” he added.

Omar al-Sahi, CEO of Egypt's e-commerce site Souq, told Al-Monitor, “Egypt has a thriving e-commerce market but it lacks rules.”

Sahi declined to comment on his company's sales in Egypt in 2017, but pointed out that the fastest growing sectors within the electronic commerce market in Egypt include electronics, cosmetics, groceries and fashion. The company, he said, is working to provide a wide variety of products at competitive prices while offering a comfortable and exceptional shopping experience in areas far from the Egyptian capital.

The government's strategy, if successfully implemented, could stimulate e-commerce in Egypt far beyond its current growth.