Economic Update

Published 29 Mar 2019

Egypt has sought to position itself as a leading regional ICT centre by signing a series of strategic deals with international market leaders to boost capacity, increasing its focus on artificial intelligence (AI) and looking to expand into foreign markets.

During the Mobile World Congress, held in Spain in late February, state-owned company Telecom Egypt (TE) signed a memorandum of understanding (MoU) with Swedish multinational Ericsson to develop TE’s main cloud network for 5G services.

This was followed by the signing of another MoU at the event that will see Chinese company Huawei develop its own cloud computing system through TE’s data centre, the first such system in Africa to be developed by an international company.

These announcements are a positive step towards improving Egypt’s ICT infrastructure capacity and facilitating growth; however, given that the MoUs don’t outline a time period for the implementation of the new technology, it is unknown when these projects will commence.

See also: The Report – Egypt 2018

Sector growing on the back of export sales

Nevertheless, the agreements should help to bolster Egypt’s ICT sector, which officials say accounted for 4% of total GDP last year and is expected to rise to 5% over the next two years.

A positive trend has been witnessed in the current financial year, which began in July 2018, with the sector recording growth of 14% and 16% in the September and December quarters, respectively.

This expansion is being driven in part by rising demand for Egyptian ICT exports, most of which are in the services segment ranging from traditional call centres to remote networking and cloud services. ICT exports totalled $3.2bn in FY2017/18, and the figure is forecast to increase by 12% annually for the next three years, according to the Ministry of Communications and Information Technology (MCIT).

At present, the sector employs approximately 175,000 people; however, the MCIT estimates that a further 100,000 positions will be added to the sector by 2022.

AI highlighted as key growth segment

One segment that is expected to play a major part in future ICT growth is AI.

Applications of AI in Egypt are projected to increase by an annualised rate of 25.5% through to 2030, according to a report issued by consultancy PwC late last year. This growth would see AI contribute $42.7bn to the Egyptian economy by 2030, representing 7.7% GDP, the report said.

“In my view AI is a key discipline and will continue to be one of the most important areas of ICT in the coming decade,” Amr Talaat, the minister of communications and information technology, told OBG.

“For this reason we have set out a strategy focused on building skills and developing talent. At the same time, we are working to attract companies specialising in AI.”

With an already strong ICT base, complete with the requisite data and digital resources to implement effective algorithms and take advantage of what AI has to offer, the country is well placed to accelerate its efforts to broaden private sector activity in the segment, the minister added.

Officials eye Africa expansion

Alongside strengthening its technological capacity at home, Egypt’s strategy to develop its ICT sector also targets foreign markets, with the rest of Africa, in particular, identified as having strong potential for cooperation and growth.

To this end, the country has accelerated efforts to build direct ties with governments and private service providers, and intends to use its term as the chair of the African Union, which began in February, to promote its ICT credentials to the region.

One such initiative is the African App Launchpad, launched by President Abdel Fattah El Sisi in November. The three-year programme will provide training to 10,000 people in both Egypt and elsewhere in Africa to build their capacity to develop gaming and other digital applications, and is also expected to trigger the establishment of some 100 African and Egyptian start-ups.

However, Egypt will face stiff competition in the African market, both at the individual company and national level.

Many ICT multinationals are seeking to expand their footprint across the continent, with US giant Microsoft active in a number of markets, while China – through its Belt and Road Initiative – is promoting closer cooperation with African countries in the sector through companies such as Huawei.

This is also complemented by expansion and investment of domestic firms throughout Africa, with this combination resulting in upgraded infrastructure and increased sales of ICT products and services.

This cooperation across the continent will help generate growth in the already strong ICT sectors in some African countries such as Kenya or South Africa, representing competition for Egypt’s planned market expansion southwards.