Citadel Capital Managing Director Discusses Emerging Markets Opportunities and StrategiesatIFC-EMPEA Global Private Equity Conference
Hisham El-Khazindar, Co-Founder and Managing Director of Citadel Capital, took part in a panel on emerging market opportunities and trends at the IFC-EMPEA annual gathering in Washington D.C, outlining the strong upside potential for sustainable, high-growth investments in Africa and the Middle East.
Citadel Capital (CCAP.CA on the EGX), the leading investment company in Africa and the Middle East with US$ 9.5 billion in investments under control,took part in the 15th annual IFC Global Private Equity Conference held in association with EMPEA in Washington, D.C. on 14-16 May.
Citadel Capital Co-Founder and Managing Director, Hisham El-Khazindar participated in a panel discussion entitled “A Macro Perspective: Emerging Markets Opportunities and Trends,” which featured global industry leaders with significant emerging market expertise and insights into the challenges and constraints of emerging market private equity.
“In many instances a crisis situation can create opportunity,” said El-Khazindar. “Across Egypt, East Africa and North Africa, we see excellent investment opportunities in sometimes challenging countries that are in need of management expertise and capital.”
In the midst of challenging economic and political conditions in Egypt, Citadel Capital’s platform company, Mashreq, singed a 25-year concession agreement to build a unique EGP 3 billion tank farm on the Suez Canal that will serve the global shipping market and be a backup Egypt’s national energy security policy.
“In Egypt, the Arab Spring and has brought about a new set of political and economic challenges that have presented some key investment opportunities. For example, the energy sector in Egypt is in dire need of new investment to upgrade existing power plants and power transmission networksas well as investments in new power generation and refining capacity to meet increased local demand for electricity and petroleum products,” said El-Khazindar. “Given Egypt’s constrained financial and organizational resources, much of this infrastructure development should be driven by the local and international private sector, in the form of public private partnerships,” he added.
Citadel Capital’s Egyptian Refining Company (ERC), a US$ 3.7 billion greenfield petroleum refining upgrade project in the Greater Cairo Areawill reduce Egypt’s present-day diesel imports by more than half, eliminate approximately 93,000 tons of sulfur emissions annually, and produce over 4.2 million tons of refined products and high-quality oil derivatives per year including 3 million tons of jet fuel and Euro V diesel (the cleanest-burning diesel fuel in the world).
“In East Africa a growing consumer base, natural resource discoveries and improved governance are driving growth and creating unique opportunities in several sectors.
We see opportunity to create value in sectors such as infrastructure that will serve as a catalyst for Africa’s growth. The insufficient amount and quality of infrastructure is currently a major impediment to developing trade, creating jobs and improving competitiveness on the continent,” said El-Khazindar.
“According to recent statistics from the African Development Bank, Africa needs US$93 billion annually until 2020 for infrastructure development. As urbanization increases, consumer markets grow and more countries on the continent develop broader ties to the global economy, the need for infrastructure investments, particularly those related to energy and transportation, will multiply,” adds El-Khazindar.
Egypt has been Citadel Capital’s center of gravity since inception. In 2006 the firm began investing directly in sub-Saharan Africa and has historically striven to broaden investor interest in African opportunities particularly thosethat move away from pure commodities and towards infrastructure,manufacturing and value-added exports.
Among the firm’s notable African investments is Rift Valley Railways (RVR), which holds aconcession to operate the national railways of Kenya and Uganda, linkingthe Indian Ocean port of Mombasa to the interiors of Kenya and Uganda, includingthe Ugandan capital of Kampala. For the past two years, Citadel Capital has beenworking with the RVR management and its local partners to implement a three-pointturnaround program with investments of US$ 287 million. RVR ishelping open doors to intra-African trade by bringing transport costs down by as much as 35% — a savings that should have a substantial impact on businessesand consumers alike.
“Investments like RVR that can be a part of Africa’s growth story are not businesses that lend themselves to short holding periods. As an investment company we are now focusing on taking a much longer 10-15 year view on opportunities versus the traditional 3-5 year private equityindustry view,” said El-Khazindar. “The bottom line: Long term confidence in these markets has to translate into long-term investment strategies.”
Citadel Capitalis currently transforming its business model from a private equity firm to an investment company to create long-term value for its shareholders by focusing on a smaller number of high-potential, unique platform companies in five core industries; energy,transportation, agrifoods, mining and cement, which are underpinned by outstanding economic fundamentals. The firm aims to add value by building sustainable businesses in industries that will be the engines of growthand economic development in its core footprint, Africa and the Middle East.
