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Thursday, 15 July 2021

My Morning Routine: James Harmon, chairman of the Egyptian-American Enterprise Fund

James Harmon, chairman of the Egyptian-American Enterprise Fund: Each week, my Morning Routine looks at how a successful member of the community starts their day — and then throws in a couple of random business questions just for fun. Speaking to us this week is James Harmon, Chairman of the Egyptian-American Enterprise Fund (EAEF). Edited excerpts from our conversation:

I’m James Harmon, chairman of the Egyptian-American Enterprise Fund, a private investment fund created by the United States Congress in 2011 to help strengthen Egypt’s private sector following the 2011 revolution and a sharp decline in tourism and foreign direct investment. To date, we have worked with five first-time fund managers to invest over USD 200 mn in over 75 companies that support more than 15k jobs. Our investments have helped attract USD 447 mn in FDI to Egypt.

When I arrived in Cairo on my first trip in 2012, foreign investment had dried up in Egypt. The political crisis at the time had frightened investors. I realized early on that for us to be successful, EAEF would have to be an Egyptian-led effort. In 2014, we “Egyptianized” the fund by seeding a team of talented Egyptian, financial professionals to serve as our investment advisors. Today, all our portfolio managers are Egyptian and almost all members of our board of directors are Egyptian or Egyptian-American who speak Arabic and have deep private sector experience in Egypt.

We made our first investment in 2015 with Fawry. It's the dream of every investor to hit a home run on their first investment. Fawry achieved this after becoming Egypt’s largest e-payments platform that now serves close to a third of the population, and recently became the country’s first “unicorn” when its market valuation surpassed USD 1 bn. We made our second investment in Sarwa Capital, Egypt’s largest non-banking financial services provider, now known as Contact Financial, which also helps extend access to finance for Egypt’s large unbanked population.

An important lesson in life for those who are investors: when things look darkest, it is usually the best time to invest. That was true of Egypt in 2015 as demonstrated by the success of our early investments.

The pandemic was similar to what we experienced when we first arrived in Egypt and the private sector needed foreign investment. We had to double down in our support for Egypt’s private sector, much like we did in 2015. We loaned Fawry Microfinance USD 10 mn to support small and micro businesses. We agreed to take the first loss on the loan, which banks generally don't do, in order to expand additional financing to businesses impacted by the pandemic. We also co-invested in the largest healthcare operator in the Nile Delta region. Later in the year, we helped our long-time investment advisor, Lorax Capital Partners, close its first, independent investment fund by committing USD 50 mn in one of the only closings in the MENA region in 2020. `

We work closely with all our companies to introduce them to US investors and provide capacity building and technical assistance to expand their businesses. We introduced our investee, then Sarwa Capital, to Prudential Financial, one of the largest ins. companies in the US, which is now helping expand the company’s newly established life ins. business. We also helped our investee, Dawi Clinics, expand its telehealth services to reach more Egyptians during the pandemic.

We’re currently looking for someone to serve as EAEF’s on-the-ground representative in Cairo. Having someone work with our portfolio companies and source new investment opportunities will help us ramp up our support to Egypt’s private sector.

In 2019 we started to shift our attention toward investing in high-impact development sectors such as healthcare, education, and agriculture. We’re now considering investments in infrastructure. I serve as co-chairman of the World Resources Institute, a leading global environmental think tank, and I hope to be able to leverage their expertise to help Egypt tackle climate change and urban transport.

So far we’ve invested over USD 200 mn and committed almost all of the original USD 300 mn the US government allocated to the EAEF. The market value of our portfolio is over USD 600 mn. In my opinion, it likely exceeds USD 700 mn. Our rate of return is greater than 20% per annum and has piqued the interest of US institutions who now want to invest in Egypt.

We have a staff of seven people located in New York that help oversee our investments and portfolio managers. As prescribed by our legislation, EAEF’s board of directors must consist of six US citizens (currently, three of the six are Egyptian-American) and three Egyptian citizens. Previously, our staff traveled to Egypt quarterly but now many meetings have moved to Zoom because of covid. We are planning to begin traveling to Egypt soon. Our team in New York helps monitor EAEF’s finances, measure our development impact and manage relationships with stakeholders in Egypt and the US We are now beginning to market Egypt to US institutions and family investment offices.

Getting back the time previously spent travelling and commuting has been convenient, although It's always better to be with people and build relationships. I would say we’ve improved our level of communication with Cairo and calls with our portfolio managers have increased significantly. We’ve been able to increase communication among our team because we are on the phone every morning reviewing what we are working on.

Not everyone is eager to return to the office full-time after a year working from home. We are working in the office one day a week and as needed to accommodate in-person meetings and partners traveling from Egypt. We will begin two days a week in September. Like many companies we are navigating a hybrid work model that aims to be flexible and most efficient for our organization.

Our challenge today is to employ the additional capital we have remaining into investments that improve Egyptians’ quality of life and support the country’s socio-economic development. We are recalibrating our strategy and are eager to support more fund managers in Egypt.

I personally managed to write a book during lockdown that will be published sometime in November 2021. It's a memoir I’ve named “Up and Doing,” which is a phrase that comes from a poem my father would wake my sister and me up with every morning when we were children called “A Psalm of Life” by American poet Henry Wadsworth Longfellow. The main theme of the poem is making the most out of life. I would never have had the time to write this book if it wasn’t for covid.

I usually wake up at 7 am and the first thing I do every morning is stretch. Over years of playing tennis, I've sustained minor injuries, so I stretch and do some exercises in the morning to stay fit. The second thing I do is check emails and read Enterprise, the New York Times, and the Financial Times. When the weather is warm, I swim laps in my pool and eat a light breakfast with fruit and vegetable juice. After that it’s calls or Zoom meetings for the rest of the day.

This past year I've spent two to three hours a day writing my book. At some point in the late afternoon, I work out again, have dinner and spend some time reading in the evenings before bed. During the weekend I like to play golf and tennis. I also have a little vegetable garden that I maintain as a hobby. There's nothing better than going outside and picking your own tomato.

Although I’m a lifelong reader, I haven't read as much as I normally do this year. Recently I read Barack Obama’s autobiography, “A Promised Land.” As our nation’s first African American president, he is an important historical figure and someone I am lucky to know personally. Another book I enjoyed is Peter Hessler’s “The Buried: An Archaeology of the Egyptian Revolution.” It was an interesting read that provided rich insight into the lives of ordinary Egyptians.

The best piece of advice I’ve ever received was from my father who said, “you learn more by listening than from talking.”

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