INTERVIEW: Investing in Egyptians Key to Success, Says Egyptian-American Enterprise Fund Chair

The US government-funded private equity Egyptian-American Enterprise Fund (EAEF) released its 10-year impact report this week, shedding light on its role in supporting Egypt’s economy.

EAEF Chairman James A. Harmon spoke to Ahram Online about the fund's support for Egypt over the past 10 years, especially amid the severe impacts of the war in Ukraine on the Egyptian economy.

Since the inception of the EAEF, over $1.1 billion has been invested directly in Egypt, in addition to $6.9 billion invested by private parallel funds.

With a capital of $300 million, the EAEF is committed to promoting financial inclusion, job creation, and increasing foreign and domestic investment in Egypt for long-term sustainable economic development.

The fund is meant to stimulate the Egyptian private sector by providing access to finance, human capital, modern technologies as well as best business practices, while also achieving financial profitability.

Ahram Online: How has the fund been supporting the Egyptian economy, particularly the private sector, over the past 10 years? James Harmon: Since our creation in 2011 by the US Congress, the EAEF has played a critical role in rebuilding Egypt’s private sector after the revolution.

We have seeded what are today the leading private equity and venture capital funds in the Middle East, expanded access to financial services for close to 50 million Egyptians via our investment in Fawry, and supported over 500,000 Egyptians with quality, affordable healthcare through our investments in Dawi Clinics and Al-Tayseer Healthcare Group in the Nile Delta.

We have invested close to $300 million in Egypt and attracted over $1 billion in foreign investment. Our investments have generated over $100 million in proceeds and we have reinvested all of this back into the country.

Today, our portfolio of companies supports nearly 40,000 jobs. AO: How has the war in Ukraine affected Egypt's private sector? Jh: The Russian invasion of Ukraine has had a negative impact on tourism revenues and food prices, with Egypt being one of the largest importers of wheat in the world.

While tourism has rebounded, Egyptians continue to struggle with higher food prices due to rising inflation and the loss of half of the value of the Egyptian pound against the dollar throughout the last year.

AO: How do you see Egypt's efforts to empower the private sector and raise its share in local economic activity? JH: If there is anything we have learned in the past 10 years, it is that investing in Egyptians has been the key to our success.

Egypt has enormous human capital, and a number of companies demonstrate the potential of the private sector to be the country’s leading engine of economic growth.

Unfortunately, the credit available to government-owned enterprises has grown more than that of the private sector over the past decade.

There needs to be a stronger growth model directed at private sector development. There is now increased attention to the role of the state in the economy. While the government has taken incremental steps to privatize elements of the economy, there is still more work to be done.

The Gulf countries and the IMF want to see more, so do international investors, if Egypt expects to attract foreign direct investment.

The government needs to show its seriousness about getting the privatization programme off the ground instead of trying to sell state-owned companies at high prices. This is a time to be imaginative.

Why not pitch some of the state-owned companies to Warren Buffett at a discount? If he shows interest and potentially invests, imagine what this will do to attract investors to Egypt.

AO: What are the investments the fund intends to pump into the Egyptian market in 2023 and beyond? JH: We look forward to continuing to support Egypt’s private, new fund managers, and our existing partners. This includes TCV, a leading private equity fund that focuses on investing in family businesses and transforming them into institutional companies that can create value for shareholders and the economy as a whole.

Case in point: Abu Auf. TCV invested in Abu Auf in 2019, helping it expand from 47 to 245 branches and become the leading healthy foods company in Egypt.

Most importantly, Abu Auf has hired close to 2,000 employees in the last three years and tripled the number of women it employs.

This is another illustration of how the private sector can create jobs and stimulate the economy if it is given the space to operate.

AO: Does the fund plan to tap into the opportunities Egypt is offering under its privatization and IPO programmes? JH: The EAEF is not currently exploring opportunities within the privatization or IPO programmes.

As others have said, we hope the government will accelerate its efforts to ramp up the privatization programme and start selling shares in these state-owned companies.

It is important the government gets the ball moving on the privatization programme.

This may entail forgoing high returns early on to increase momentum and demonstrate its commitment to following through with the privatization agenda.

AO: Which sectors does the fund intend to focus on in terms of its investments, and which sectors does it plan to tap into for the first time?

JH: The EAEF has a mandate to help Egypt’s private sector grow and attract foreign investment into the country. As a result, we are sector agnostic and look for any opportunities that can generate financial returns and create a positive social impact.