Africa is Rocking with Opportunities for Private Equity

Citadel Capital Chairman and Founder Ahmed Heikal tells senior industry leaders at the EMPEA/ Financial Times 'Private Equity in Africa Leadership Summit' that private equity general partners face a vista of opportunities in North and East Africa ' provided they can articulate a business and funding model capable of capturing them

Speaking at a gathering of senior industry leaders today in London, England, Citadel Capital Chairman and Founder Ahmed Heikal declared that, “Africa is rocking with opportunities for savvy private equity players. 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 US$ 9.5 billion, participated in a panel discussion on driving Africa’s economic transformation at the EMPEA / Financial Times Annual Private Equity in Africa Leadership Summit.

“Now is the time for Africa, which stands today 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, noting that, “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. Similarly, we see outstanding demand for infrastructure, compelling macro fundamentals and welcoming frameworks in North African nations including Algeria and Egypt.”

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

“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 US$ 3.7 billion petroleum refinery that will help reduce by 50% Egypt’s present-day diesel imports, generate more than US$ 300 million in annual benefits to the state treasury, and reduce by nearly one-third the country’s present sulfur dioxide emissions.

ERC is backed by US$ 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.”

With local and commercial bank funding scarce, financing large-scale private equity investments demands that GPs access new pools of capital including European development finance institutions (DFIs), Asian and American export credit agencies, and Gulf Cooperation Council sovereign wealth funds.

“We refer to this as the triple combo: Investors with healthy appetites for large-scale investments that are economically transformative and that build in environmental, social and governance benefits,” Heikal noted. “ERC, for example, will help the Government of Egypt improve the environment, close its balance of payments gap, and redress a deficit market for refined products that has translated into nation-wide queues this year. Similarly, our investment in Rift Valley Railways will help the Governments of Kenya and Uganda deliver economic growth by offering far more favorable transport economics, which will ultimately help bring down the price of goods for consumers and businesses alike.

Asked what is necessary to spur new private equity in Africa, Heikal replied, “GPs need to accept that fear of risk in Africa is overblown. Private equity firms that will succeed in Africa share many of the same characteristics as pure entrepreneurs: They’re not more tolerant of risk, they’re simply better at risk mitigation on the political-regulator, operational, and financial fronts. By the same token, governments need to strengthen regulatory frameworks and be active in stamping out corruption.

“Against this backdrop, we see outstanding opportunities as we look to grow our core investments and pursue new investments in the coming five years,” he concluded.

Also attending the EMPEA summit is Citadel Capital Managing Director Karim Sadek, who participated in a high-level discussion of regional investment opportunities and challenges post-Arab Spring.

Asked about the impact of the Arab Spring, Sadek noted, “In Egypt, the 25 January Revolution reset expectations, not the country’s compelling macro fundamentals. The bulk of our 85 million citizens are not interested in an accounting for the policies of the past decade, but in job creation.

“These jobs are going to be created by the same fundamentals that savvy private equity investors played on before the Revolution and again today: A diverse economy based on industry, not resources. The Arab world’s largest workforce and largest consumer market. Proximity to key global export markets and an interlocking network of preferential trade agreements. These factors translated into 6-7% annual GDP growth pre-Revolution, but the growth was not inclusive. Making it so is the challenge of our age.

“Doing this will demand that the private sector step up to the plate — and that the government press forward with deregulation of key industries including energy, one of the key investment themes on which many of our core investments play, from the Egyptian Refining Company to our fuel-efficient and environmentally friendly river transport platform and our waste-to-energy investment,” Sadek concluded.

The annual leadership summit, now in its fourth year, is presented by The Financial Times, This is Africa Magazine and the Emerging Markets Private Equity Association (EMPEA). Each year the summit brings together leading private equity investors who focus on how to maximize growth opportunities across the region.


Citadel Capital (CCAP.CA on the Egyptian Stock Exchange) is the leading private equity firm in the Middle East and Africa. Citadel Capital focuses on building regional platforms in select industries through acquisitions, turnarounds, and greenfields executed via Opportunity-Specific Funds. The firm’s 19 OSFs now control Platform Companies with investments worth more than US$ 9.5 billion in 15 countries spanning 15 industries, including mining, cement, transportation, food and energy. Since 2004, Citadel Capital has generated more than US$ 2.2 billion in cash returns to its co-investors and shareholders (on investments of US$ 650 million), more than any other private equity firm in the region. Citadel Capital is the largest private equity firm in Africa by PE assets under management (2007-2012, as ranked by Private Equity International). For more information, please visit

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