CAIRO: Abraaj Capital, the Dubai-based private equity firm, continues to see Egypt as an investment hub for the region despite the political uncertainty that is weighing down on the country’s volatile economy, managing director Mustafa Abdel-Wadood said.
"Egypt has always been a core market for us in terms of our investment geography even though our investments span from Morocco to Indonesia," he told Daily News Egypt.
"If we look at the Middle East area specifically, Egypt is attractive for a number of reasons, even in the context of the short term volatility. It is a diversified economy, there is a large population and a relatively young population and there is also a high consumer demand."
Over the past four to five years, Abraaj has deployed $2 billion into Egypt’s market, making it one of their largest targets, geographically.
While there is no vision for new ventures in the near future, according to Abdel-Wadood, the firm has around $1 billion invested in Egypt today and it hopes to see these investments grow further in this upcoming period.
"We’ve helped grow Al Borg Labs. We’ve done the same with Spinney’s [supermarkets]," he said, "The existing investments we continue to invest in them and grow them."
With Egypt’s growing need for job opportunities at a time where many ventures have been halted as investors lose confidence in the market during the transitional period, Abraaj has dedicated a regional fund for small and medium enterprises (SMEs) that considers Egypt as one of the "core areas."
"We’ve been looking at Egypt’s SMEs base. We’ve already done a couple of transactions, one of them is an IT company called OMS [and] the other is Agro Corp., which produces agricultural products and exports them," Abdel-Wadood added.
"These businesses have strong growth profiles and we are investing in them right now."
Both transactions were signed and completed after the January 25 uprising that ousted Hosni Mubarak.
Despite Abdel-Wadood’s optimism, he noted that there has been instability in the government’s policies towards private investments and businesses.
"We believe in the opportunity in this market but we just have to take a very cautious approach until there is more visibility around direction, in the context of economic policies. And you can only get that as you move from a transitional period to a new leadership that sets that in place," he said.
Abdel-Wadood stressed that while there should not be "special" treatment for businesses, the government should make it a priority to regulate and facilitate laws for investors so that the future of business ventures can be clear.
Despite the need for political and social change, he added, it is still the government’s role to create transparent laws that would not allow for corruption and theft.
"We understand there are other priorities at the moment, at least in the short term in terms of focus on political and social agenda, but you cannot let economic policy and the business agenda take a backseat. It is critical for the long term growth in this country," he explained.
Without the proper facilitation for businesses and investments, the country, which has booming younger generations, cannot create the proper jobs that are needed for social advancement, he pointed out.
In the period following the January 25 uprising, instead of creating new economic policies and transparent laws for business, the country has taken another direction.
Several companies have seen their licenses revoked and many businesses have been targeted for previous dealings and transactions that took place under the Mubarak administration.
In September, an administrative court in Cairo suspended the privatization contracts of three companies, sparking fear among local and international investors.
"One of the challenges that increased volatility as well is that there’s a strong populist anti-private sector sentiment, which frankly is not very encouraging. We realize these are short term sentiments, but to the average investor that is a challenge. The other challenge is the business agenda has taken a big backseat," he said, "Not to say we won’t invest in this period; we will just be more cautious."
In September, Abraaj came under fire from one of Egypt’s most prominent shows, "Akher Kalam" hosted by Yousri Fouda which is now off air.
Fouda had criticized the company, along with several other firms, for being stakeholders in one of the leading investment banks in the Middle East and North Africa region, EFG Hermes.
Hosni Mubarak’s son, Gamal, who is currently on trial for financial corruption and using his father’s authority to facilitate business deals, also had shares in EFG.
Fouda’s episode alleged that Abraaj capital was somehow associated with the previous regime and their business web.
Abdel-Wadood stressed that the accusations brought up in Fouda’s show were poorly reported, researched, and simply "not true."
"We owned shares in EFG for a period of time in 2006-2007, and I said that, but so did 15,000 other people," he added. "These allegations about our involvement with the previous regime were completely baseless."
