October 21, 2010 4:45 pm

Egyptian companies look beyond borders

Egyptian companies have been increasingly searching the Middle East and further afield for opportunities to expand. But in a country with a relatively young modern corporate sector, it is mainly the larger domestic names that have ventured beyond Egypt’s borders.

“You need to be able to afford very strong management, and to mobilise slack resources,” says Ahmed Heikal, chairman of Citadel Capital, an Egypt-based private equity firm. “You also have to have strong governance processes, and well-developed communications so that when the guy sitting in your office in Nairobi calls, there is someone who will listen to him.”

Citadel Capital has $1.7bn in investments in African countries, excluding its assets in Egypt. Its portfolio companies span a range of sectors such as agriculture, river transport, cement, construction, oil exploration and energy distribution, and includes a railway line. The company is present in Sudan, Algeria, Ethiopia, Kenya and Uganda.

Citadel says its strategy is based on capitalising on opportunities across more than one market, by investing in companies that can be turned around or grown to become “regional champions”. One such example is Ascom Geology and Mining, its Egypt-based subsidiary, which has grown to provide quarry management expertise to cement producers across the region.

In spite of instability in parts of Sudan, Citadel has invested $40m to cultivate crops in the country on land leased from the government by two subsidiaries – one operating in the north and the other in the south. The plan is to grow sugar, corn, cotton, wheat, sunflowers and sorghum, mainly for the local market, which has an annual grain shortfall estimated at 400,000-500,000 tons a year.

“We are looking at 40-50 per cent return,” says Peter Schuurs, chief executive of Concord Agriculture, one of the subsidiaries. “No one else is doing it, and imported food comes from a long way. The name of the game is to get there first and to do it first.”

Azza Fahmy is a rare example of a medium-sized company that has established a presence outside its home base. The jewellery company and international brand, named after its founder and chief designer, has expanded into Jordan, Qatar, Dubai, Lebanon and the UK, through a combination of franchises and distribution agreements with local partners.

Fatma Ghaly, managing director, says 30 per cent of total sales are generated outside Egypt.

“We feel this is where for us the opportunity lies for growth,” she says. “We are also about to launch an online boutique as we don’t have the retail presence internationally to meet demand.”

Azza Fahmy, considered the leading jewellery designer in the Arab world, builds on Islamic and Arab motifs to create original jewellery crafted in silver, gold and semi-precious stones. Her creations are worn by Arab royalty and members of the social elite. She also produces collections for international fashion designers such as Julien Macdonald and Preen.

Big Egyptian corporates working regionally or internationally include Orascom Telecom, an operator of mobile networks in a dozen countries, including Algeria, Pakistan, Canada and North Korea. Another is Orascom Construction Industries, which builds large infrastructure and industrial projects in the region. It also owns fertiliser plants in several countries. There is also Sewedy Cables, with 23 production facilities in 12 countries in Europe, Africa and the Middle East.

In finance, investment banks EFG-Hermes and Beltone Financial have established a strong presence in the oil-rich Gulf region. EFG-Hermes recently paid $542m for a controlling stake in Credit Libanais, a Lebanese lender, as part of a plan to transform itself into a regional universal bank with a retail arm.

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