Rami El-Dokany

TBY talks to Rami El-Dokany, Executive Chairman of The Egyptian Exchange (EGX), about the historical business environment in Egypt.

Since EGX was established in 1883, what changes did it bring to the business environment in Egypt?

The Egyptian Exchange has always been playing a significant role for the Egyptian economy. The Alexandria Exchange Investments was established in 1803 and the Cairo Stock Exchange in the early 1903. The fact that they ceased to operate between the 1960s and early 1990s does not negate this; however, we are now seeing a gradual and consistent shift in the economy from one year to the next, with different segments of the population dealing with the exchange. EGX always provides a great platform for companies to raise capital and access equity finance, at the same time providing significant support to companies in terms of governance and disclosure, which is key for investments.

What is the breakdown of EGX in terms of SMEs, and how does EGX engage with them?

SMEs are an integral part of the Egyptian economy, though this is not accurately reflected on EGX. All over the world, including in emerging markets, one major challenge is market gaps. It is definitely easier to find and invite large companies to list on EGX. SMEs, however, require significantly more effort in terms of not only convincing them to list but also preparing them for the journey. Becoming a public company entails various aspects; companies need to be transparent. They must understand that other investors in the market are holding on to stock, and those investors meanwhile also need to understand what the business is doing. Companies have to properly disclose their finances, ensure the right governance, and maintain proper books, which are not the case with majority of SMEs. These are the most common challenges for us in terms of SMEs. At the same time, we are looking into a different segment; EGX currently works with many tech start-ups. There is an interesting opportunity there, and we work with start-ups in various ways, including helping them to be listed, access financing, and others.

How would you define innovation, and how has EGX embraced innovation in terms of products or technologies?

EGX gives the digitalization and fin-tech solutions the priority in its strategy, and already starts to take serious steps toward achieving this target. In order to achieve this target EGX is working with the market participants and support the brokerage firms to adopt the fin-tech solutions when they deal with their clients. One great example in the market is the tech start-up Thndr, which is an application to help customers invest in the stock market. It has made a real impact in terms of unlocking value and getting more people to join our system. For example, in 2022 we took on almost 175,000 new coded clients into the market and more than 180,000 newly coded during the first four months of 2023. We help Thndr with internal solutions to increase its efficiency and reduce costs. From initially some 200 investors a day, there are now up to 2,000 investors a day. We are also looking at other ways to update areas where things are still being done manually. Our goal is to develop an app in EGX to connect with the community and provide better solutions to operate and open up the market for other players to come in. We are late to the game here. It is time to develop our own app and create more value. We hold vast amounts of data and should better monetize our various assets.

EGX has a historical experience in ESG index, and recently EGX announced that it is working on the African Voluntary Carbon Market, Can you give us a more details about this?

EGX was the second exchange globally to issue an ESG index in 2010. It was also one of the pioneers of the UN’s Sustainable Stock Exchanges initiative (SSE). It was appointed to chair SSE’s advisory Committee for sustainability, which includes many other exchanges. Based on the recent sustainable report issued by the Arab Federation of Capital Markets on September 2022, the work that EGX has done in sustainability checks all the boxes compared to other exchanges in the GCC. Others might be bigger or hold greater influence. However, in terms of the sustainability agenda, we perform better. EGX continues to conduct many training programs for companies to ensure they meet ESG and sustainability reporting requirements. The regulator is also doing a great job as well, and starting from 2021 EGX will file annual reports with mandatory ESG disclosures. It will be a tough learning curve for companies, but we are focusing on this to ensure sustainability remains high on our agenda. It is not just about being perceived well in terms of sustainability or being trendy; we see it as an actual business opportunity for corporates. We explain to companies here that in the future, they will not be able to export their products if they are unsustainable. Airlines will not be allowed to travel over Europe if they do not reduce their carbon emissions. We are taking this concept seriously and communicating to companies that this is an opportunity for them. Many companies still believe it is a fancy concept that does not require their attention; however, once they start getting hit with actual numbers, they eventually realize they need to do something concrete. During the COP27 Conference hosted by Egypt in Sharm El-Sheikh, the EGX announced the launch of the 1st VCM in Africa, to start operating in 2023. We are targeting six objectives:

• Promote VCMs locally and regionally.
• Encourage domestic GHG emission reduction by certifying carbon credits.
• Raise awareness of climate change among the public and private sectors.
• Prepare all stakeholders for prospective emission reduction agreements.
• Create new business opportunities for market participants.
• Motivate participants to integrate ESG principles into their strategies.