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Monday, 22 March 2021

How Actis is doubling down on investment in physical infrastructure

Actis is doubling down on investment in physical infrastructure: It’s music to our ears when a major global investor such as Actis starts talking about big-ticket investment in key infrastructure sectors including social infrastructure such as education and healthcare — and that’s just what partner and Middle East & North Africa chief Sherif El Kholy (LinkedIn) told us in an exclusive sit-down.

Actis has a pipeline of transactions in education, renewables, water and healthcare on which it will be executing in the near future, including an announcement of an Egypt acquisition by Honoris United University — Actis’ regional education platform and Africa’s largest private higher education network, spanning countries from Morocco to South Africa.

Actis is also investing in its existing portfolio of companies. The global emerging markets champion has invested over USD 1 bn in Egypt and today stakes and board representation in high-profile businesses including leading payments firm Fawry and hospitals group Cleopatra.

Edited excerpts from our conversation:

Our Egyptian portfolio has been the best in the region. We’ve had some liquidity and operational challenges within the region [thanks to covid], but when it comes to Egypt our assets have by and large been very resilient — we’ve got very high-quality assets here. Healthcare has obviously been doing particularly well, in all elements — including diagnostics, hospital services, and payments. We’re the largest shareholder in Cleopatra Hospitals, which has just signed a mega-acquisition of 100% of Alameda Healthcare. As I’m sure you recognize, this was with our full support and involvement.

Our portfolio of high-quality Egyptian assets also includes our investments in renewables. We’ve made a huge investment in our wind power station in West Bakr (Actis backs Lekela Power, which has invested some USD 350 mn in its 250 MW West Bakr wind farm). These types of both physical and social infrastructure have been areas that we’ve historically been very big in and we’re 100% committed to continuing our support for them.

And then some, as we are going to be doubling down on these physical assets. Today, across our markets, we see a huge and growing opportunity in all areas related to infrastructure. This includes: Electricity generation, distribution, and transmission; water treatment and desalination; digital infrastructure like fiber and data centers; and real estate.

And of course, that also means education, where we’re also working on an interesting new acquisition in Egypt. Actis is the controlling shareholder of the largest private higher education business in Africa: Honoris United Universities. Honoris is prioritizing an Egyptian entry in the coming period, and is working on closing an acquisition during 2021.

Beyond education, we’re looking to expand in a host of other sectors: We’re also looking to expand our portfolio of renewable assets in Egypt and the region — both greenfield and acquisitions of existing opportunities. It’s hard to pin down a number for how much we’re planning to deploy in 2021, considering everything that’s going on with covid. But we’re getting ready to participate very strongly in upcoming water treatment and desalination projects. We’re exploring investment prospects in digital infrastructure — everything from data centers to fiber to the home. And we’re working on developing opportunities in the real estate sector, or even in hospitality — hotels and business travel.

Actis is committed to being an ESG investor — not just in Egypt, but globally. Our entire portfolio is absolutely at the top echelons of ESG commitments. Every single investment we make is held to a very high level of accountability in terms of ESG standards, across all the different sectors.

What does that mean for our fossil fuel investments? We’re trying hard to be an agent of change away from thermal energy and fossil fuels in general.

Having said that, we’re still interested in getting in on the privatization of the Siemens power plants. We remain very interested in that. We’re still in talks with the Sovereign Fund of Egypt about it, and we’re ready to move forward when the government’s ready. But still our focus is very much on investing in clean energy. By this, we mean both onshore and offshore wind, as well as solar energy. Then in due course, we’ll even be looking at hydrogen.

Our push on infrastructure and our agreement with Apis does not mean we’re divesting from financial services. For Actis, it’s really business as usual. We’re the owner and manager of all our assets, and we retain all legal responsibility for them. These remain our operations and funds, under our administration. So in that sense, nothing is changing. What we have with Apis is a partnership where we can work together on our financial services portfolio. It’s essentially a co-advisory arrangement, where we benefit from their FS sector expertise in an advisory capacity. And this is great because Hossam wants to focus on financial services, and Apis is a financial services fund. So I think there’s a meeting of minds there.

[Editor’s Note: London-based financial services PE outfit Apis announced last month that it will play a co-advisory role in managing certain investments, including Fawry, in Actis’ financial services portfolio. Hossam Abou Moussa, and Actis partner of 15 years moved over to Apis, where he will, among other things, help Actis manage those assets under a co-advisory arrangement.]

There’s nothing new happening in terms of our strategy. We’re continuing to invest very heavily in our existing portfolios and platforms. We just want to focus increasingly on deployment into the areas I noted above.

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