Qalaa Holdings is a leading private equity investment company in Egypt focusing
How do you assess Egypt’s energy hub potential?
The Egyptian government has made a push to increase local production of oil and gas by changing the profit-sharing regime companies. Therefore upstream companies are increasing their investments. Egypt’s two LNG companies make the national goal of becoming an energy hub easier.
What facts shape your outlook on Egypt?
I am incredibly bullish on Egypt’s potential. The economic reform is for the first time tackling the real problems of Egypt. Especially the subsidies that have been present in all products and services. These subsidies have inhibited the private sector from entering major infrastructure projects because they forced to go through government at a lower price and were not sustainable in the long run. Many investors were holding back due to them. A worrying challenge is the level of debt. We also need to be very careful with our currency, so we don’t repeat previous cycles where we fix the currency for years, pressure builds, and it devaluates suddenly to half its value. We need a free-floating currency.
How has blended finance worked in Egypt?
We invented blended finance in Egypt. In 2006 we were already using a triple combo financing method utilizing private, sovereign wealth funds and other sources. The start timing for our ERC project was quite unfortunate and was delayed several times due to financing. The 2008 global financial crisis meant several international lenders faced significant challenges, the 2011 Arab Spring in Egypt followed this, and up until 2013 very little could be accomplished on the ground. To reach financial closure, we increased our commitment to the project by EUR 156 million. These 13 years took a toll on us and delayed many other ideas we had in mind.
However, 2019 is a crucial year for the project, and its commissioning allows us to focus on other multi-billion range projects. We are in the development phases for two significant projects. One is an expansion of ERC to allow for downstream petrochemical industries. A second is a logistics and transportation hub.
What should foreign investors remember about Egypt?
Every single one of Qalaa’s 37 companies is adding substantial investments in Egypt over the next few years. This should convey our trust in the growth potential of the market and encourage others to invest in Egypt.