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A frontier for the bold: PE and the path to democracy in Egypt

Investing in MENA has never been for the timid, but no other geographies provides better opportunities for bold investors, says Citadel Capital founder Ahmed Heikal.

Admittedly, the events of the so-called “Arab Spring” are redrawing the region’s political landscape, but the economic fundamentals that saw the Middle East and Africa out-pace global growth in the five years to January 2011 remain unchanged. If anything, our long-term fundamentals will be shored up by greater democracy, and our medium-term prospects enhanced by unique opportunities born of change.

Nowhere does this fact hold truer than in Egypt, birth place of Citadel Capital. When the revolutionaries took to Tahrir Square, they did so because they sought to forge a better future and they were willing to make deep personal sacrifices to turn that longing into reality. While they have succeeded in allowing Egypt to take its first tentative steps toward democracy, the road ahead is long and the challenges many.

Ahmed Heikal

To rebuild a nation requires infrastructure, cement, agribusinesses and a network for energy distribution, to name but a few. Such large-scale projects do not come cheaply, and the biggest challenge facing the country is the gap between fiscal realities and the demands of a rapidly forming consumer class with an appetite for change.

It is here, however, that opportunities lie. The government of Egypt, like others across the region, is coming under increasing pressure to do more with less. As a result, state actors are more likely than ever to be receptive to long-term partnerships with responsible private-sector entities.

Indeed, lasting political stability is predicated on the type of meaningful economic growth and job creation that only the private sector can deliver.

Patience, though, is essential. With the political transition taking priority, many attractive investment opportunities are facing slower sign offs and lengthy delays. In the current climate, government officials think twice before signing their names to anything.

The primacy of politics at present is not necessarily a bad thing: Clarity regarding the political roadmap will only encourage FDI. It does mean, however, that many of the world’s most sophisticated institutional investors are adopting a “wait and see” approach. (Others, development finance institutions in particular, have stepped up their engagement, as we have found since January; they remain in the minority.) How quickly the government can stimulate this process will be crucial to the country’s economic recovery.

Hesitancy on the part of foreign investors waiting to see how politics will play out in light of the “Arab Spring” means many are missing the opportunities that North Africa presents today

Ahmed Heikal



As policymakers look for alternatives, they would do well to harness the innovation of private sector actors such as Citadel Capital. Tanmeyah, our micro-enterprise venture, is helping bright young Egyptian entrepreneurs create jobs. Rift Valley Railways of Kenya and Uganda is a textbook example of how government and private equity can cooperate for the national good and stimulate intra-African trade in the process. Wafra, our Sudanese agriculture investment, shows that business can help a nation feed itself. Nile Logistics in Egypt is the kernel of a river-based, environmentally friendly transnational transportation solution.

Citadel Capital has always operated in a tough environment. Recognising and managing socio-economic and political risk has been at the core of our investment strategy since inception. Hesitancy on the part of foreign investors waiting to see how politics will play out in light of the “Arab Spring” means many are missing the opportunities that North Africa presents today.

This belief doesn’t come without a cautionary caveat. Investors need to do their due diligence; indeed, only fools rush in. Investment should be made through those who have the regional understanding and local expertise to navigate the political minefields, mitigating the risk you are undertaking.

Those investors who have taken the time to review the underlying fundamentals of the region are not afraid, they are inspired. They know that economic growth and political stability go hand in hand. In the meantime, they would do well to note that it takes an awful lot of cement to pave the road to democracy…

Ahmed Heikal is chairman and founder of Citadel Capital. Founded in 2004, Citadel Capital is ranked by Private Equity International as the largest private equity firm in Africa and one of the ten-largest emerging market private equity firms globally.