5 November 2012

Africa Is a Gold Mine for Savvy Investors

Citadel Capital Chairman and Founder Mr. Ahmed Heikal has declared that Africa is bursting with opportunities for savvy private equity players.

Heikal notes that on a continent where all capital is essentially growth capital, private equity general partners who have on-the-ground knowledge and the ability to mitigate risk can structure and execute large-scale investments that harness compelling fundamentals.

Heikal, whose firm controls investments of more than $ 9.5 billion including Rift Valley Railways in Uganda, participated in a panel discussion on driving Africa's economic transformation at the EMPEA / Financial Times Annual Private Equity in Africa Leadership Summit in London.

"Now is the time for Africa, which stands as 1 billion-person-strong consumer and will be home to the world's largest working-age population by 2040.

"East Africa in particular is exceptionally exciting today," he said, adding, "the region's large population, abundance of natural resources and an infrastructure base better-developed than many other regions of Africa make it home to very attractive opportunities."

"Capturing these large-scale opportunities demands ability to structure and fund complex transactions -- and build businesses from the ground up -- that is uncommon in developed markets, Heikal cautioned.

He added that with many key industries being nearly virgin territory, growth capital is the order of the day in North and East Africa.

"This translates into a much higher appetite among African general partners for Greenfield investments -- and, as a result, longer holding periods than is the norm in the West," he noted.

Citadel Capital has invested US$4 billion in Egypt since 25 January 2011, including the arrangement of full financing for ERC, a $ 3.7b petroleum refinery that will help reduce by 50% Egypt's present-day diesel imports, generate more than $ 300m in annual benefits to the state treasury, and reduce by nearly one-third the country's present sulfur dioxide emissions.

ERC is backed by $ 2.6 billion in debt financing and a further US$ 1.1 billion in equity. ERC's equity component stands as the largest equity raising in Egypt since 2007 and in Africa and the Middle East year-to-date.

"ERC and other investments like it are made possible in part because today we have a new generation of African policymakers who are -- by and large -- very welcoming of private sector investment in previously hands-off industries such as energy and infrastructure.

They also understand that successful private equity investments demand the right legal and regulatory infrastructure be in place," said Heikal.

"And it is precisely these industries, in addition to sectors such as commodities and consumer plays that are most attractive to private equity firms with a tolerance for longer holding periods."

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