Developing an efficient logistics system is vital to e-commerce success in Egypt. Without robust infrastructure, the growing number of goods to be sold online can’t reach rural Egypt. To overcome this challenge, UNCTAD and other UN agencies partnered with Alibaba, a Chinese e-commerce giant. Funding was also provided by US multinational financial services corporation Mastercard. Here are the main challenges faced by e-commerce companies in Egypt.
Challenges to e-commerce in Egypt
Despite the many advantages, there are still challenges. In a recent study, researchers at Cairo University noted that the biggest challenge to e-commerce in Egypt is security. Despite the threat of a Covid-19 epidemic, many Egyptians continue to purchase products online. The study noted that 85% of current online shoppers plan to continue to shop online, and 82% of them prefer using credit cards. While security issues are still significant, they are less a hindrance than they used to be.
The e-commerce strategy in Egypt includes strategic recommendations for addressing the country’s digital economy and overcoming these challenges. The strategy is built on an integrated framework of policy areas, including ICT infrastructure, telecom services, logistics, legal and regulatory environment, and trade facilitation. This framework addresses the various aspects of the e-commerce landscape in Egypt, including electronic payments and e-procurement. The strategy emphasizes how to leverage the strengths of the ICT sector to create a more thriving e-commerce sector.
Taxation of e-commerce businesses in Egypt
The Egyptian government has made progress toward digitization through the development of a national digital transformation strategy and Vision 2030 plans. The recent Covid-19 pandemic has only accelerated these plans. Currently, Egypt taxes online businesses at about 9 percent while traditional sellers pay around 20 to 23 percent. Recently, the Finance Ministry announced that Egyptian internet companies will be subject to value-added tax. This means that consumers will be taxed 14 percent on any online purchases.
To date, the Egyptian Tax Authority has mandated that e-commerce businesses register and file their taxes. The only exception to this rule is if a business earns more than EGP 500,000 annually. Most e-commerce businesses are still in the startup stage and are not yet profitable enough to file taxes. Additionally, Egyptian entrepreneurs often use social media sites to promote their products and services. These sites are also subject to income tax.
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The first significant impact of the outbreak was a drastic drop in online sales as the number of daily cases increased dramatically. The effective reproduction rate also rose significantly, surpassing the March peak. This prompted authorities to reintroduce containment measures. On November 3, a partial second lockdown was announced, with the second lockdown becoming more stringent on November 17 and extended until January 18. In the meantime, the government is encouraging businesses to adhere to a strict quarantine regime and is providing incentives for business to adapt to the changes.
Despite the difficulties faced by Egyptian e-businesses, the COVID-19 crisis encouraged businesses to develop and expand their online businesses. E-commerce is increasingly becoming a viable alternative for brick-and-mortar store operators, but moving to the online market requires investment. Larger merchants, however, have invested in their distribution and sales infrastructure. This increased their incentive to expand their business and their market share.
Need for a monitoring system for e-commerce businesses in Egypt
The Egyptian government has been implementing a new law establishing a data protection agency and an explicit constitutional protection of privacy. Despite this, the country does not have an effective data protection agency. The current state of emergency allows the government to gather customer information through unwarranted means and does not require a legal basis for doing so. Privacy International is collaborating with partners to help Egypt establish a monitoring system for e-commerce businesses.
While Egypt’s Internet penetration is a high-ranking region of the MENA, it remains comparatively small compared to other regions. The country’s zip codes are inaccurate and non-existent, which poses a challenge to last-mile delivery providers. This abysmal infrastructure presents numerous challenges for last-mile delivery providers. Although Nasser was able to observe this situation upon his return to Egypt from the U.S., he attributed this to a lack of thorough planning.
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