Education Sector
Elisabeth Shawky Associate, Corporate Commercial
Nour Gheith Associate, Banking & Finance
The Egyptian private educational sector is currently one of the most attractive sectors for investment purposes. With the introduction of various new international schools and universities in Egypt, it has become a hotspot for investment for all educational stakeholders. The government from its side has been exerting efforts to support and work hand-in-hand with the private sector to enhance the quality of education in Egypt through its initiatives and regulations. This Law Update aims to explore the advantages and disadvantages of investing in Egypt’s private educational sector from an investor’s perspective, such as the introduction of edtech in Egypt and its current regulations.
Many qualities and factors make Egypt an eligible and competent hub for investment in education. Perceived as “the largest education system in the Middle East and North Africa (region),” as per PricewaterhouseCoopers (PwC)’s 2019 Understanding Middle East Education report, Egypt’s current situation enjoys “a sustainable demand for education due to steady population growth, an improving macroeconomic setting, the need for private investment to support making improvement to the quality and capacity of Egypt’s educational systems.” With Egypt’s arguably limited technological resources, it was capable of shifting towards a more innovative approach. Even though the Covid-19 pandemic put Egypt’s educational sector at test, it was still able to adapt by transitioning and accelerating the demand for edtech. According to the electronic news outlet Enterprise, “Covid-19 drove the edtech focus for startups towards tutoring and away from management systems.” With the emergence of edtech startups in Egypt, indicators show a highly receptive rate in the educational sector and market, as one edtech startup connecting parents and students to nearby tutors, teachers, and online videos and courses, successfully secured an amount of $2.1 million in its pre-Series A round in late 2021. In early 2021, the Egyptian Minister of Education Tarek Shawki issued two ministerial decrees No. 237 and 238 for the year 2020, granting unlimited foreign ownership in international and private schools, and thereby abolishing the previous 20% cap on foreign ownership, imposed by Decrees No. 305 and 306 for the year 2019. While such change was faced with some criticism by educational experts, it is evident that investors are satisfied with the new decrees. According to Ahmed Wahbi, the CEO of GEMS Egypt for Education, a private-sector education provider, the new ministerial decree “will boost investment in the education sector and help current operators to improve their services and meet the demand for educational services.” Further disclosures were made regarding the future plans awaiting the Egyptian education sector, such as investing $300 million in building 30 schools with a capacity of range 25,000-30,000 students over the course of two years.
With all the efforts of the public and private sector to attract investment, there tend to be some disadvantages hindering such an appeal to investors.
With all the efforts of the public and private sector to attract investment, there tend to be some disadvantages hindering such an appeal to investors. As a part of the government’s efforts to involve the private sector in elevating and assisting in the provision of education to less fortunate and underprivileged individuals with potential, a certain cost has been imposed on investors. In the year 2019, Law No. 4 for the year 2019 was issued for the establishment of a fund that aims to support innovation and talent (the “Talent Support Fund Law”). While this may seem like a rewarding initiative, it acts as a burdensome obligation for many investors due to the obligatory contribution it enforced. Article 4 of the Talent Support Fund law and its executive regulations issued by the Ministerial Decree No. 2587 of 2020, stipulates that upon obtaining a decree for the operation of a private or non-profit university, a one-time licensing fee shall be imposed on the said university to be allocated to the fund. Accordingly, that one-time fee shall be 5% of the approved budget of the said institution. Nevertheless, upon the issuance of a decree approving any amendments to the information relating to the ownership structure of the said university, another 5% of the said university’s budget shall be imposed on each change in the ownership as approved by a decree by the Minister of Higher Education.
Even though the article as a whole seems unappealing and concerning for investors, the wording of the article could be argued as vague and incoherent. It is rather unclear how the aforementioned 5% will be calculated. Moreover, Article 4 does not specify precisely whether it applies to direct or indirect change in ownership of the said university. Hence, the Law, along with its issued executive regulation, contain several loopholes that need to be identified and fixed to solve the misleading points stipulated and can be construed as an indirect market entry tax that hinders much needed fresh investment in the universities sector. Furthermore, the fact that a Presidential Decree is required for the entry into of any new investor in universities and the Egyptian ownership requirement of 51% continue to be factors that limit investments in existing universities.
Finally, it is evident as per the increasing number of student enrollment and number of private schools and universities, that Egypt is an investment hotspot for education from the perspective of all educational stakeholders, as the circumstances and conditions allow for it to take place. However, some fallacious government regulations happen to impede the set out aims to attract investment and enhance educational levels in Egypt. Therefore, it is imperative to revisit these restrictions and ensure their accuracy in addressing their intended aim. At the same time, it is important to acknowledge the advantages generated as result of the investments directed to the educational sector in terms of economic growth, enhanced education level and accordingly a positive long-term impact on standards of living.
For further information, please contact Elisabeth Shawky or Ehab Taha.
Published in August 2022
Illustration of Maya Angelou
