Insight

Egypt’s ultra-wealthy choose European structures to achieve business ambitions

Cairo Egypt

Wealth in Egypt is growing at a considerable pace, primarily among a close-knit community of ultra-high-net-worth (UHNW) families. Knight Frank’s 2020 Wealth Report predicts Egypt to have the second-fastest growing UHNW population in the coming years, with an anticipated increase of 66% by 2024 – second only to India, and compared to a global average of 27%.

Moreover, just as we are seeing across all key regions globally, a seismic transition of family wealth is set to take place between generations within the next couple of decades.

As discussed in a recent IQ-EQ white paper, the inheriting generation is showing considerable interest in having influence over family investment decisions. They want a hands-on role and are excited by direct investments and opportunities that bring greater accountability. Unlike their predecessors, they’re also keen to embrace new technologies.

The next generation of Egypt’s wealthy families are well educated and well-travelled. They have spent time abroad for education and adventure. Many have since returned home, armed with new skills, ideas and worldly experience, ready either to get involved in the family business or to start up their own ventures as entrepreneurs. They tend to be keen to enter new markets or further develop Egypt and the wider MENA region.

Amid all of these ambitions, Egypt’s next gen are challenging the old models used by their families’ businesses, looking for newer and better ways to do things. We’re also seeing them restructure their businesses with private equity backers and hunt for other external investors.

However, though Egypt is developing, there is still a nervousness and reluctance among international investors to invest directly in the country. In this context, Egyptian entrepreneurs and family businesses have their sights set on Europe – not only as an ideal place to generate external investment, but also as a way of winning over their target investors, including development finance institutions (DFIs) among others.

European corporate structures create a level of comfort for the serious investors that the next generation of Egyptian business leaders are trying to attract. As such, at IQ-EQ we’re increasingly seeing Egyptian businesses being restructured through Europe to achieve investment and growth goals.

Within Europe, certain jurisdictions are standing out as favourites among Egyptian clients; namely the Netherlands and Luxembourg, both of which are known globally as reputable investment hubs and offer a range of flexible structuring options for institutional, corporate and private clients.

The specific structures used differ on a case-by-case basis, but as an example, in Luxembourg we’re seeing Egyptian corporate clients often choosing the Société de Participations Financières (SOPARFI) as their top holding vehicle, which suits both holding and financing activities. However, when the client’s focus is on wealth protection and succession planning, it’s primarily the Société de gestion de Patrimoine Familial (SPF) that we see used in Luxembourg. Meanwhile, in the Netherlands we’re witnessing significant uptake of Dutch B.V. company incorporations, as well as the implementation of Dutch parallel fund structures.

Another factor driving Egyptian interest in European structuring is the evolving global regulatory landscape, which is bringing with it growing recognition of the importance of using reputable jurisdictions. We’re therefore simultaneously seeing Egypt’s most affluent families leaving behind their old business models and structures in order to utilise leading international financial centres that are globally respected and home to robust regulatory and legal frameworks.

For example, one of our clients, the family office of a prominent Egyptian family, wished to structure its business through Europe for all of the reasons outlined above. IQ-EQ was appointed to implement several vehicles in Luxembourg and the Netherlands. In addition, we worked with our team in Mauritius to structure the family’s North African investments.

As wealth continues to grow in Egypt, as the so-called ‘great wealth transfer’ sees more worldly-wise millennials take the reins of family businesses, and as jurisdictional selection assumes ever-greater importance, we at IQ-EQ expect to see more and more interest from Egyptian clients in both Luxembourg and the Netherlands as attractive, reliable avenues to achieving their business and investment ambitions.

Speak to IQ-EQ

If you or your clients wish to speak to IQ-EQ about utilising Luxembourg or Netherlands corporate structures, please get in touch:

Smain Bouchareb
Client Relationship Director, Luxembourg
E: [email protected]  
T: +352 466111 6315

Lawrence Kho
Director Corporates, The Netherlands
E: [email protected]qeq.com
T: +31 20 522 24 32