In a surprising turn of events, several Egyptian banks have sent notifications to their customers, announcing the cessation of direct debit card transactions in foreign currencies. This unexpected decision has raised concerns among a diverse array of businesses, from established corporations to emerging startups, that operate within the country. The primary motivation behind this move is to combat the illegal smuggling of foreign currencies out of Egypt. However, this measure has inadvertently posed significant challenges for companies that rely on international transactions.
Numerous businesses in Egypt, especially those in the technology sector, now find themselves grappling with a complex situation. They have forged partnerships with international tech giants that necessitate payments in foreign currencies. Until recently, these transactions were effortlessly facilitated through direct debit cards. In light of this recent policy change, these businesses are urgently searching for alternative methods to conduct their financial operations.
The decision by the Central Bank of Egypt to suspend direct debit card transactions in foreign currencies can be primarily attributed to the nation’s dwindling reserves of hard currency. The central bank’s objective is to safeguard these reserves for critical import operations and reduce losses incurred due to illicit currency activities. There is speculation among experts that exceptions could potentially be made for companies that can convincingly demonstrate the legitimacy of their business activities and maintain dollar accounts.
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Prominent Egyptian industry experts, whose insights were sought regarding these developments, have emphasized the profound implications of this decision, particularly for startups and technology companies that rely extensively on foreign technology services. These businesses predominantly engage in foreign currency transactions and contribute significantly to Egypt’s hard currency income. In the wake of this decision, some of these companies are considering the establishment of offshore dollar accounts or even contemplating moving their operations overseas, actions that could potentially influence Egypt’s economy.
The companies most severely affected by this decision encompass startups, online retailers, software development firms, and e-marketing companies. These enterprises heavily depend on foreign currency to carry out their trade and marketing activities. Should this policy persist, some of these businesses might even contemplate withdrawing from the Egyptian market. While a few startups are currently exploring temporary solutions, such as using foreign accounts held by relatives or acquaintances, these stopgaps are by no means sustainable in the long term.
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Wael Nofal, the CEO of BlinkUp, a company specializing in phone applications, is among those who received these notifications and expressed his astonishment at the sudden disruption. BlinkUp relies on collaborations with international tech giants like Microsoft, Amazon, and Google to deliver advanced services to the public. This partnership requires payments in foreign currencies, traditionally processed through direct debit cards. Nofal is now compelled to explore alternative avenues, including involving an overseas investor to manage commercial transactions until the company can potentially establish itself outside of Egypt.
Egypt’s recent decision to halt direct debit card transactions in foreign currencies has cast a cloud of uncertainty and challenges over both established companies and burgeoning startups. While the move’s intention is to safeguard the nation’s foreign currency reserves, it inadvertently poses a threat to the survival of businesses reliant on international transactions. The hope now lies in policymakers reevaluating this decision and working towards solutions that ensure the continued growth of these companies, as well as the prosperity of the Egyptian economy.
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the con