ITIDA to launch $15m entrepreneurship support fund: CEO

Increasing domestic demand, supporting entrepreneurship, and attracting foreign investment are the most important features of ITIDA's strategy, says El-Gueretly

The Information Technology Industry Development Agency (ITIDA) relies on six main points for its strategic plan for the fiscal year (FY) 2015/2016. ITIDA CEO Hussein El-Gueretly told Daily News Egypt that development of domestic demand, supporting export, and promoting creativity and entrepreneurship are the most prominent of these points.
El-Gueretly revealed a number of agreements with several private sector companies specialised in supporting entrepreneurship to set up innovation centres next to universities by the end of this year.
What are the main points of ITIDA's strategy during the next phase?
In the upcoming period, our strategy will focus on a number of key themes represented in six main points. These points are: development of domestic demand for Egyptian companies, and assisting and supporting companies to export and work on increasing the foreign demand for Egyptian companies' production through creating export opportunities for Egyptian companies and linking them to their foreign market counterparts.
The strategy will also focus on attracting foreign IT investments, in addition to supporting creativity and entrepreneurship, as well as the development of human resources through the provision of appropriate training opportunities. The last important point of ITIDA's strategy is stimulating electronic signature industry.
A budget was allocated for all development programmes, upon which ITIDA will rely during the upcoming period. This budget has already been approved by the Board of Directors of the agency, and its implementation has started.
What steps is the agency taking to open new markets for Egyptian companies, especially with the decline of domestic opportunities?
Over the past year, we organised some trips to a number of African markets, accompanied by a number of Egyptian companies, to help them open new markets and increase the size of their external business and face the declining local demand. The trip also aimed to enhance their returns, and support them in making partnerships with similar companies to exchange experiences.
Last year, there were several visits to Kenya, Nigeria, Ghana, Tanzania, Zambia and Uganda. Several promising results were achieved from these trips. We plan to repeat this experience soon through a promotional tour of local companies in this market during the current fiscal year, which creates confidence among customers of those markets and helps Egyptian companies increase export opportunities.
What about plans to go to western markets?
We will start the implementation of a plan during the current fiscal year to promote the Egyptian market in the United States by participating in the international conference, IOAT, which is the biggest global event in the outsourcing industry and information technology services. The purpose of participating in the conference is to attract new foreign companies to the Egyptian market.
As for the European market, we plan to participate in the SSON conference, which is an international conference for outsourcing companies and networks. It will be held in the UK in October. During the trip, we will work to help Egyptian companies form partnerships with their UK counterparts. We have also decided to conduct an exploratory visit to the German market.
The German market has recently become attractive for Egyptian human resource in the IT sector. What do you think the impact of that will be?
Yes, indeed. There has been a trend among qualified human resources in the IT sector to flee to the German market, as well as the Gulf market. This is due to the presence of many research and inventions units in international companies in Germany, in addition to there being many opportunities to establish companies with little effort.
The impact of this immigration will be positive in the long term for the Egyptian market. The more people immigrate, the more efforts will be exerted by local companies to prepare and qualify new ones. Thus, this will increase the sector's resources, which are mainly composed of qualified human resources. In addition, Egyptian immigrants will acquire new skills that will help them to establish successful companies in Egypt, given that the Egyptian market has many investment opportunities. These new companies can be very attractive for investment if the appropriate investment environment is created.
So you think the current investment climate is not suitable?
Unfortunately, the investment climate is not suitable, but this does not preclude the presence of local investment opportunities, which can be tapped once a suitable investment climate is achieved. The information technology sector currently needs to promote and review the success of some of the Egyptian models, such as Hatim Zaghloul, or Michel Fattouche. Both of them can take credit for inventing wireless technology. There are other examples, such as Amr Awadallah, Khaled Ismail, and Tarek El-Esseily, who are all only a few examples of the many successful figures in the Egyptian IT sector.
ITIDA plans to support business entrepreneurship and creativity in a non-traditional way – Did you take any serious steps towards this?
Yes, we have. We started a three-month workshop to develop an action plan to establish a small enterprises risk capital fund of $15m. Several figures and experts participated in this workshop, such as delegates from the Social Fund for Development (SFD), Ayadi Foundation, and a number of private sector entrepreneurship investors, led by Sawari Ventures' Ahmed El-Alfi, in addition to Ziad Aly, founder of Al-Zawad, Wael Amin, founder ITWorx, and Khalid Ismail, Founder and CEO of SySDSoft, as well as KI angel fund that specialises in investing in emerging companies.
It was agreed during the first session of the workshop to start taking steps to establish the fund, especially after the consensus of specialists in entrepreneurship regarding the lack of investors and investment funds to finance companies and creative ideas in the Egyptian market, especially in the early development stage. All emerging companies undergo this stage, where they need investments by specialised funds so they can continue to carry out their activities.
We have also agreed on the establishment of creative centres in the governorates near the universities to accommodate the youth's creative ideas. These centres will be managed by the private sector to take advantage of their expertise in this part. We will start the high-risk capital fund, as well as two creative centres, by the end of this year.
What is your perspective on the fund's capital and composition?
The participation of the SFD has been approved. IDITA has allocated 5% of the funding obtained by the fund from the World Bank, which is worth $300m, as the bank refused to use the entire amount for the establishment of a high-risk capital fund.
What is ITIDA's budget size this fiscal year?
We cannot disclose the size of the budget now, but it's almost 10% higher than last year's budget. It should be noted that last year, ITIDA's budget was EGP 500m.
Were mobile operators' revenues affected due to their participation in ITIDA's budget?
There has not been any evidence of revenues declining. This year's revenues were not very different than the last year's. It should be noted that all three mobile operators; Vodafone, Mobinil, and Etisalat, allocate 1% of their total net profits to ITIDA, as per the Egyptian Law of Communications.
Will you focus on any non-traditional sources of funding?
Yes, we are considering a number of new financing solutions. This was established during the tripartite agreement between the agency, the SFD, and the World Bank. Fees paid by the three mobile operators represent our main source of financing for now. We plan to expand the fee-payers base, but the current economic conditions in the sector do not allow for this. We were planning to include software exporters to the fee-payers' list to increase the funding sources, so as to raise the number of supported companies and help the market grow.
The Software Export Council is expected to generate an annual income for the agency of EGP 3m, while the e-signature centre is expected to secure the agency with EGP 10m.
What are your plans to stimulate the electronic signature in the upcoming period?
There are two parts to the electronic signature. The first is for government employees to sign at their entities. The other part is concerned with the activation of e-signature of government services provided to citizens, which is linked to a number of other projects, such as the new national ID card project.
Therefore, we began to implement the first part of the electronic signature through an agreement between the Ministry of Communications and the Ministry of Planning, at a preliminary cost of EGP 10m. This amount was allocated to activate the system in 10 government bodies, on top of which is the NTRA, the port of Damietta, and some judicial authorities. We have received requests from 52 other bodies to implement the system.
You have recently contracted with IDC. What can they provide you with?
The IT sector suffers from a lack of accurate statistics. For example, the value of software exports is estimated by calculating the number of employees and the annual value of each employee. This is very inaccurate. We also discovered by chance the existence of more than 23,000 Egyptian freelance programmers, who offer their services to foreign companies via the Internet. We contracted with IDC, which specialises in research and consulting, so they survey the size of the Egyptian market, the value of its exports, and divide them according to sectors; software, electronics, and services. We also hope to have an accurate estimation of the sector's employment capacity.
How many companies are registered with ITIDA at the moment?
We have a list of 1,400 registered companies, 80% of which are small and micro enterprises. The remainder is divided between medium and large companies.