'Extraordinary is the new ordinary' for MENA

The political turmoil that has engulfed the Middle East and North Africa in recent months was both necessary and beneficial over the long-term, according to speakers at the Middle East Forum of PERE's sister publication Private Equity International.

Jeremy Coller, chief investment officer of Coller Capital, said: “Trying to work out what’s happening here over the past few months has been like chasing a moving target – pardon the pun. But it’s an incredibly exciting time for the region – almost too exciting.”

Coller compared the Middle East and North Africa markets to Brazil 15 years ago: “More than 300 million people, half of them young and huge capital available to go with that huge population. There’s a massive opportunity here as the political atrophy of places like Egypt is replaced by new regimes coming in, and capital from places like Abu Dhabi is used to fuel the regional economy.”

The turmoil in the region has stymied the tentative recovery following the global economic crisis, according to panellists. This has impacted fundraising and investment activity in the short term, according to Mustafa Abdel-Wadood, managing director of private equity group Abraaj Capital.

Over the last few months, we've learnt that extraordinary is the new ordinary. As with many emerging markets, a changing environment can create opportunities. Mustafa Abdel-Wadood

“It’s an extremely fluid environment here at the moment as the region goes through a major shift. Fundraising has been challenging but there is now genuine and strong interest coming back on the fundraising side,” he said. 

“We will see something of a slowdown in the recovery that’s taken place since the economic crisis. But longer-term, the region’s demographics and story still hold. It’s one of the fastest growing emerging markets and is very much under-invested.”
 
Abdel-Wadood added: “Over the last few months, we’ve learnt that extraordinary is the new ordinary. As with many emerging markets, a changing environment can create opportunities. Private equity isn’t about the moment, it’s about stepping back and looking at longer-term market fundamentals.”

Those fundamentals were spelled out by Jeffrey Singer, chief executive of NASDAQ Dubai, who said: “The governments of Saudi Arabia and Egypt are going to plough a lot of capital into their economies, which will have a big impact on the wider region. Over the next three to five years, the amount of money set to be invested in infrastructure will ensure it remains a place of growth.”
 
If political events in the MENA region are throwing up ever more attractive investment opportunities, the global financial crisis of recent years has also caused fundamental changes to the private equity model as the industry adapted to survive.

Roberto Quarta, a partner and European chairman at global private equity firm Clayton, Dubilier & Rice, said: “We needed to change, and we have changed. Private equity has had to become more transparent. We have acknowledged that if we’re buying companies which employ a large proportion of a country’s workforce, we owe those people a social responsibility.”

Quarta also envisaged a significant role for private equity managers: “There’s an opportunity now for private equity

Private equity has had to become more transparent. We have acknowledged that if we're buying companies which employ a large proportion of a country's workforce, we owe those people a social responsibility. Roberto Quarta

to do some wonderful things. Looking at Brazil’s story, for example, it lacked the flexible capital that would have accelerated its growth. We can provide that flexible capital here in the absence of traditional capital.”

Hisham El-Khazindar, managing director and co-founder of private equity firm Citadel Capital, spelled out in an onstage interview session what that meant for Egypt. He said: “Egypt’s competitiveness in the global economy – as an export and manufacturing hub as well as in its capacity as a destination for foreign capital – will only rise as long-term political risk is mitigated by greater democracy. We see we are on the right side of macro trends.”

Institutional investors at the Forum encouraged local general partners to court foreign capital, engage more closely with investors, and sell the region's strong fundamentals and private equity opportunity to them.