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Sunday, 4 June 2017

Carlyle eyeing investments in Egypt

Carlyle eyeing investments in Egypt: Private equity outfit Carlyle is eyeing two investment opportunities in Egypt through its USD 700 mn Africa fund, according to Bloomberg’s Colin McClelland. The fund will commit between USD 30 mn and USD 100 mn on each, managing director Eric Kump said, declining to name industries or be more specific. “We are being more active in North Africa, specifically Egypt … They’ve gone through a painful dislocation and done the right things on the macro level, and it’s a very populous country with a lot of well-managed businesses,” Kump says. McClellan notes that “Carlyle’s Africa fund has been on a buying spree in the past year, purchasing stakes in telecom CMC Networks Ltd., promotional products supplier Amrod Ltd. and debt rating company Global Credit Rating Co., all based in Johannesburg. Its portfolio also includes tire retailer TiAuto Investments Ltd. of Johannesburg, Luxembourg-based mining services company Traxys Sarl and Nigerian lender Diamond Bank Plc, fund documents show.”

Investors have been returning to Egypt since the end of last year, “scenting opportunity — and bargains,” Siona Jenkins writes in the Financial Times. Andrew Brudenell, head of frontier markets at Ashmore, expressed a similar sentiment to Carlyle’s Kump, saying “given the size of Egypt, its demographics, the level of education, the low-hanging fruit of reforms — in terms of longer-term opportunity, the country is one of the big ones.” Charlemagne Magna Mena fund’s lead portfolio manager, Akhilesh Baveja, says he became bullish on Egypt after the devaluation. He is betting on Egypt’s demographics: “As a nation, Egypt has a long, strong identity. The future may not be perfect, but demographics will bring things back.” While Baveja notes that “we have passed the worst,” EFG Hermes’ Simon Kitchen says it is going to take a long time for our consumer spending power to recover domestically as “real incomes have been hit very badly.”

Going against the sanguine sentiment is Crispin Hawes, MENA Managing Director at Teneo Intelligence, who is bearish and says “the economy is better now than at any point in the past five years, but there is little reason to believe it can be maintained” and that investor appetite is opportunistic and does not reflect “the need for fundamental structural change and the weakness endemic in the structure of the economy.”

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