Usama Elsayed, COO and Managing Director for MEA region, BPC, charts how digital transformation in Egypt is boosting economic progress and financial inclusion
With a population of more than 100 million, Egypt is confronting significant demographic challenges in its labour market. The country strives to advance its economic development by implementing the National Sustainable Development Strategy (Egypt Vision 2030), aligning with the UN Sustainable Development Strategy (2030 Agenda), and adhering to the 2063 Agenda.
Despite these efforts, Egypt continues to face challenges with escalating unemployment rates and a growing influx of new entrants into the labour market. However, digital transformation may offer a potential lifeline.
Demographic pressures in Egypt
Unemployment in Egypt has consistently shown a structural tie to demographics, predominantly affecting young, educated individuals entering the labour market for the first time. In other words, Egypt’s burgeoning youth population is one of the main drivers of labour market pressures. More than 60% of Egyptians are under 30, creating a massive need for job creation.
The traditional industries have been unable to absorb the high number of new entrants, leading to urban unemployment rates hovering around 7-10%. This situation is further exacerbated by the mismatch between the skills offered by the education system and the labour market requirements.
The digital economy presents a possible beacon of hope in the face of these challenges. The rapid expansion of the Information and Communication Technology (ICT) sector in Egypt has created numerous job opportunities, with start-ups, technology companies, and e-commerce platforms significantly contributing to the growth of the digital economy.
Digital transformation in Egypt also has the potential to reduce the financial exclusion rate by offering accessible financial services to the unbanked and underbanked population.
But can the digital economy create enough employment opportunities to address the unemployment challenge in Egypt? The answer is nuanced. While the ICT sector has experienced rapid growth, it is not enough to absorb the vast number of new labour market entrants. However, it does offer opportunities for growth in other sectors through increased efficiency and productivity.
Opportunities of digital transformation in Egypt
Investing in digital transformation in Egypt can enable businesses to streamline operations, automate processes, and reduce costs. This can lead to the creation of new jobs in various sectors, such as logistics, agriculture, and healthcare.
For instance, adopting digital technologies in agriculture can enhance food production and create new employment opportunities in the agri-tech sector.
To harness the potential of digital transformation, Egypt needs to invest even more in education and skill development. This includes improving the quality of education, focusing on STEM subjects. So far, the ICT sector has experienced significant growth in labour demand in recent years, providing a welcoming environment for women in particular.
As Selwaness et al. (2023) note, while ICT jobs accounted for a small portion of total employment (1.8% in 2021), private sector employment in this field expanded rapidly at a rate of 5.5% per annum. This growth far outpaced the 2.1% per annum rate for non-ICT jobs between 2009 and 2021.
Interestingly, while women’s employment in non-ICT jobs within the private sector declined at a rate of 1.4% per annum, it surged at an impressive 10% per annum in ICT positions. These suggest that the rapid expansion of the digital economy could generate employment opportunities that align with the aspirations of the increasingly educated workforce set to enter the Egyptian labour market.
Investing in Egypt’s digital infrastructure
Egypt should continue to prioritise investing in digital infrastructure. Ensuring the availability of high-speed internet across the country, including rural and remote areas, is paramount to achieving this goal. Access to reliable and affordable internet services will facilitate the growth of the digital economy and create a conducive environment for start-ups and technology companies to thrive.
Investing in digital infrastructure also involves developing efficient data centres, reliable cloud services, and robust cybersecurity measures. These support the growth of digital services, e-commerce platforms, and technology-based businesses that require a dependable digital ecosystem.
By investing in digital infrastructure, the government can help bridge the digital divide that exists between urban and rural areas, ensuring that all citizens can benefit from the opportunities provided by the digital economy.
In addition, Egypt should encourage public-private partnerships to foster innovation and drive digital transformation. Finally, the government must create a supportive regulatory environment for the digital economy. By implementing progressive policies and regulations, Egypt can attract local and foreign investment, further driving the growth of the digital sector.
In conclusion, the digital economy offers significant growth and job creation opportunities. By investing in education and digital infrastructure, and fostering a supportive regulatory environment, the Egyptian government can harness the potential of digital transformation to alleviate some of the demographic pressures on its labour market.
The path ahead may be challenging, but with a strategic commitment to a more digital future, Egypt can create a sustainable and inclusive labour market for its burgeoning youth population.
