The economic outlook is uncertain — but good Egyptian businesses remain attractive to investors: That was the key takeaway from a panel at the Enterprise Exports and FDI Forum on Monday that featured Hossam Abou Moussa, partner at Apis Partners, Hassan Massoud, associate director and head of private equity for the Southern Mediterranean at the European Bank for Reconstruction and Development (EBRD), and Cheick-Oumar Sylla, the International Finance Corporation’s director for North Africa and Horn of Africa.

“Egypt is and has always been investable,” Abou Moussa said, pointing out that Apis “doesn’t have allocations, and we choose to invest in Egypt.” Economic uncertainty “is a little bit higher” right now, “but this doesn't prevent investors from investing in Egypt. They just need to price it in,” he said.

The IFC is in for the long haul: “We believe in the future and we are not stopping any investments [in Egypt],” Sylla said. “The short term will be difficult, we’re more optimistic on the medium term, but the important thing is that investment decisions are still moving ahead.”

The best-placed firms to ride out challenges? Exporters have an upper hand in navigating the uncertainty around the FX rate, Massoud pointed out. Looking ahead, the next question will be which businesses can weather inflationary pressures, he said, highlighting NBFS firms as good candidates. Abou Moussa pointed to the fintech sector as particularly resilient to economic challenges as tech-enabled financial inclusion brings a “wave of digitization that is benefiting the bottom of the pyramid” and creating business opportunities.

Lending a helping hand: “Progressive legislation” targeted at facilitating investment from the likes of the Financial Regulatory Authority and the central bank is also helping to attract FDI, Abou Moussa said.

A good time to look to private equity? “Private equity at large has a huge role to play in this period of economic dislocation that we're living through, because PE capital can be flexible [and] go places where capital has not gone before,” the EBRD’s Massoud said. The current economic situation, “as difficult as it is at this point for a lot of folks,” is also “opening up opportunities [and] places where private equity and private capital has not really spent a lot of time looking.”

All three organizations invest heavily here:

  • The IFC has invested a little over USD 3 bn in Egypt over the past five years, Sylla said. Its current active investment portfolio amounts to around USD 1.4 bn and includes investments in private-sector renewables, healthcare, and financial firms.
  • The EBRD has a mandate to invest c. USD 1 bn here each year across various sectors, Massoud said. That investment comes largely in the form of lending to state-owned enterprises and large-scale infrastructure projects, though the organization has also invested in private outfits like local solar player Infinity as well as co-investing alongside PE firms in local companies.
  • Apis Partners “provides growth capital to innovators” across emerging markets and Europe, including here in Egypt, said Abou Moussa. The firm is sector-specific, focusing solely on funding those companies that “sit at the intersection between financial services and technology.”

SO, HOW CAN LOCAL FIRMS ATTRACT FDI?

Build a solid reputation: A strong reputation gives investors confidence, indicating that a company has built trust and credibility within its industry and with stakeholders, the panelists said.“At IFC we do extensive market mapping where we identify and collect intelligence about sectors and players before engaging with any companies,” Sylla said.

Values, not valuation: Companies should pay close attention to whether their values and objectives align with potential suitors, “not the valuation or who’s paying the highest price,” Abou Moussa said. Foreign partners and local firms need to see eye-to-eye “on value-creation expectations and level — basically that they’re pulling in the same direction.” With this foundation set, investors like Apis can then support a company on management, product development, and cross-border expansion to achieve those shared goals, he said. The IFC “can really engage at a very early stage and if we believe that the project makes sense, we can help to make it investible,” Sylla said.

ESG is here to stay and companies need to get on board, said Sylla. Adopting an ESG (environmental, social, and governance) framework that encourages corporate transparency and sets standards for how a business treats workers, the wider community, and the environment is now a minimum requirement for any business looking to export or attract FDI, he said. “Whatever you do, you have to take care of your staff and your customers.” Massoud agreed, pointing out that 40-50% of EBRD’s investments are “in one way or another green.”

And doing the right thing is by no means at odds with generating returns: As an ESGI investor — where the “I” stands for impact — Apis invests “to achieve the highest level of return to our investors responsibly with a strong impact agenda — and we mean that,” Abou Moussa said. Helping businesses improve on ESGI factors is “part of value creation .. it’s not to take away from the return,” he said. “A well-governed business that has a strong ESG and impact agenda would have a premium to it — it would actually be valued higher” when seeking FDI, he noted.

Local businesses don’t have to check every single box, the panelists said. Potential partners can help smaller business and family outfits improve on the advisory and business development fronts. The IFC has also seen strong demand for sessions on helping family businesses — which make up the majority of private Egyptian firms — get good governance structures in place, Sylla said. While the EBRD invests in later-stage businesses, private equity firms are well placed to help younger businesses improve governance, Massoud noted. Abou Moussa agreed, saying that Apis can show a business the ropes on good corporate practice, from “how to run a board meeting and have independent directors” to “how to have proper governance in terms of audit committees.”

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