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Private-equity fund sparks entrepreneurial energy in Egypt

David Ignatius on

CAIRO -- You can't find many success stories in America's sour, sullen relationship with Egypt over the past decade. Mostly it's been a tale of mutual suspicion, thanks to erratic American policy and growing Egyptian political repression.

But talking with Amal Enan, a 33-year-old Egyptian economist, you realize what a healthy relationship could accomplish. She runs the Cairo office of an innovative, little-noticed development project that's quietly backed by the two governments, known as the Egyptian American Enterprise Fund.

This private-equity fund, using money appropriated by Congress, is helping finance new small and medium-size businesses that are creating jobs and entrepreneurial energy in the sometimes moribund, statist Egyptian economy. Starting with $300 million, the fund has had a roughly 19% internal rate of return over the past four years, Enan says.

With President Abdel-Fattah el-Sissi visiting Washington later this month, it's a good time to think about projects like this that can help the Egyptian people, rather than the military and the regime. There's a trust gap with the Egyptian public: America has alienated nearly every segment of the population here since 2011 -- by jettisoning pro-Western President Hosni Mubarak that year, then looking the other way during el-Sissi's 2013 coup against Islamist President Mohammed Morsi, and then shunning el-Sissi.

The Egyptian-American relationship was a jewel of U.S. foreign policy four decades ago, with the Camp David peace agreements, but those days are long gone. Yet Egypt still matters in the Arab world, and a mutual repair process makes sense. The story of the Enterprise Fund illustrates how this reset could begin.

Enan met me Friday in downtown Cairo, at a hotel next to Tahrir Square, the epicenter of the Arab Spring rebellion in 2011 that ousted Mubarak, empowered Morsi and the Muslim Brotherhood, and then boomeranged with a takeover by the Egyptian military through then-Gen. el-Sissi. The regime now suppresses journalists, comedians, actors and even, this week, Egypt's cherished soap operas.

 

Tahrir Square is largely empty these days, physically and emotionally. Cairo itself seems a noisy but somewhat joyless city, where half-filled tourist boats ply the Nile and Egyptians seem united, above all, in resenting the United States. There's so little interest in American studies these days at the American University in Cairo that the department has been looking for other missions.

Enan is an encouraging counterpoint. A Cairo University graduate who received an MBA from Harvard Business School, she demonstrates the intellectual capital that's abundantly available in Egypt, despite the autocratic regime. The fund's investments, similarly, show the business creativity that's bubbling under the lid.

The fund's strategy was to jump-start private-equity markets that could finance startups and innovative companies. To assemble and manage its portfolio, the fund chose an Egyptian investment firm, Lorax Capital Partners. The Egyptian government was wary at first, but gradually embraced the project.

The fund's portfolio illustrates the opportunities that exist in Egypt and other so-called "frontier" markets. The first investment was in a company called Fawry, an electronic-payments firm that has 120,000 outlets throughout Egypt; its market value has quadrupled since the fund invested in 2015. Next came Sarwa Capital, a consumer-finance company that recently went public at three times its early valuation; the fund also backed Orchidia, one of the fastest-growing pharmaceutical companies in Egypt.

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