Foreign investments are often touted as Egypt’s panacea, a lifeline for domestic development and economic growth. At a time in which the Egyptian economy is floundering, due in part to a combination of economic instability and social unease, many analysts, economists, and entrepreneurs look to foreign investors to jumpstart economic recovery.
In an effort to learn more about how foreign companies and investors currently view the Egyptian market, Daily News Egypt sat down with the chairperson of the Egyptian-American Enterprise Fund (EAEF) James A. Harmon to talk about potential EAEF investments in Egypt and new investment opportunities.
What are the possible investment opportunities in Egypt?
We see opportunities in Egypt, partially because many other investors are frightened. Whenever I invested throughout my life, I realised that when investors are frightened, the return on investment is usually very good. The greatest opportunities for me came when others were frightened. But we aren’t investing just to make profits but also to support social and economic development. When our fund is liquidated in 10 years, the profits will be shared with the Egyptians in a legacy foundation that could invest in hospitals and education. American people only look towards getting their money back in 10 years, but our mission is to first help Egypt’s private sector grow and to create job opportunities.
How did the EAEF collaborate with Egypt’s private sector?
We have made five investments worth about $100m in the financial and healthcare sectors, and established two funds for investing in small- and medium-sized enterprises (SME).
How will the EAEF finance SMEs in Egypt?
Very few countries in the world have been successful in funding SMEs. The private sector understands business better than others. I have been doing this for many years, and realised that most government officials are not qualified to help small companies. I am hopeful that our success in Egypt in the next five years will lead the American government to create enterprise funds in many troubled countries, including Afghanistan and Syria. The key to our success is creating significant jobs, encouraging other investors to follow us, and, personally, I hope that we encourage other countries like China and Germany to do what we are doing for Egypt and other countries. I hope that someday the Enterprise Fund will be seen as a critical tool for the growth of SMEs in the developing world.
How do you view the public sector and the army entering the business sphere?
I don’t see any investments being done by anybody in SMEs, which is the backbone of any economy. We aren’t impacted by the military investments. There are enormous investment opportunities in Egypt; right now, we are trying to find the best opportunity which helps the economy the most. There is some competition, but it is considered minimal compared to the rest of Africa or the developing world.
Will the fund target certain sectors?
We hope to help SMEs and some larger companies that don’t have funding. We started with how to create financial inclusion since less than 10% of the population have a bank account. The other sector we are looking at is healthcare. Someday, I hope we will find an opportunity to support education and agriculture.
Will you invest in the energy sector?
We could but I don’t think we will buy shares. We do not want to compete with other investors. We want to invest where others don’t want to invest.
What incentives can the government give to investors in order to encourage more investments in SMEs?
Firstly, I think President Abdel Fattah Al-Sisi has already created a more stable environment. Where there is no political stability, there is no economic stability. If there is a revolution every year, no one is going to invest, so you have to ensure political stability. That is why the IMF programme is so important. After that, there are a lot of things that the government can do. One of the most important things is reducing bureaucracy. Each of our investments here took us a lot of time to close. I could have closed the same deal in Italy or Turkey in significantly less time. They have to speed up the process.
You met with Al-Sisi in New York. What did you discuss?
He spoke about why we should invest in Egypt, making a very good case. He said that Egypt is more stable, safer, and focusing on its challenges. He also hopes that all of us who attended the meeting will come to Cairo and help Egypt. He did a very good job, but from my experience, it is not just about how well you make your case—it’s about how you follow up on it afterwards.
After two revolutions in Egypt, how do you view investment risks in Egypt?
The risk is not as high as it was in 2013. It is getting better. Al-Sisi is working on stability and it’s definitely improving. Some investors are waiting for the IMF programme to be implemented. Very small amounts of foreign investment were made in Egypt this year, but we did, and we will, invest all of our funds—not only this year, but in the next 18 months.
What do you think about the government offering international treasury bonds in order to get the first instalment of the IMF loan?
The government has to do that. This is what we call a treasury function to solve the deficit problem. But this has nothing to do with our investments—we are investing in private companies in Egypt.
What do you think of the government’s decision to float the Egyptian pound?
I think the flotation was a positive development for investors. I expect we will see a major increase in foreign direct investments. Reforms have been critical in demonstrating the government’s commitment to taking difficult measures that will ultimately lead to economic growth, and the market has reacted positively.
Protecting the most vulnerable groups in society will be key and in that regard private sector engagement is very important. To that end, EAEF is an investor and we are focused on investments with a positive development dimension, which includes investing in SMEs, creating jobs, and improving access to finance in order to improve the quality of life.
