S&P Overview of the New SMEs Law

Within the last three (3) years, the Egyptian legislature has embarked on a journey of business-friendly legislative changes through enacting various legal instruments that consider the benefit, protection, and ease of doing business in Egypt.

The prime examples of this include the 2017 Investment Law, the 2018 Companies Law Amendments, the 2018 Public Procurement Law, the 2018 Cyber Security Law, the 2020 Data Protection Law, and now the 2020 MSMEs Law. These legislations were ‘on-time’ as the subject of each of them is too delicate in its regulatory aspect, and it comes as no surprise that with the intended development and economic growth of the Egyptian Market, these new laws create a business-friendly environment.

Naturally, a closer look at the New MSMEs Development Law No. 152 of 2020 ­which was enacted on the 15th of July, 2020 (the “Law”) is a must in this business-friendly environment for many reasons; MSMEs comprise a massive share of the Egyptian Labour force (70%) and also, almost all agricultural production in Egypt comes from MSMEs. MSMEs also generate (34%) of Egypt’s GDP and constitute – as of 2019 – (95%) of the Egyptian corporation landscape. In addition, MSMEs represent 44.6% of the private sector, with approximately 1.7 Million foundations. In terms of production, MSMEs production value has reached about EGP 1.237 Trillion, and EGP 804 Billion in Added Value.

The Law deals with Micro, Small, and Midsize Enterprises (the “MSMEs”), as well as Entrepreneurships – as a sector – from the cradle to the grave as the Law deals with categorization, funding, and facilities for such business entities. Moreover, the Law touches upon some crucial points related to Informal Economy Projects (the “IEPs”), which has been a highly controversial topic for some time in Egypt since it comprises almost (60%) of the Egyptian Economy.

Naturally, the Law details a few incentives given to all entities comprising the life cycle of MSMEs, including both tax and non-tax incentives. In addition, the Law facilitates the work of the entities that will support the ecosystem of these MSMEs; this includes Business Incubators, Business Accelerators, and funding entities.

Furthermore, the Law has established a governmental body, namely, the MSMEs Development Authority (the “MSMEs Authority”), that will overview the financing and facilitation of any required procedures for MSMEs, Entrepreneurships, and Informal Economy Projects.

The Law also annuls the only instrument that was regulating this matter, which is law no. 141 of 2004 (the “Old Law”). However, given the executive regulations of the law were not issued till date, The Old Law’s regulations remain in effect.

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