CAIRO: According to panelists at this week's Exporta North Africa Trade and Investment Conference, investment opportunities are to be had as global investors eye the region's diverse nascent sectors. Angus Blair, head of research at Cairo-based investment bank Beltone Financial, said, “In the early 1990s, few were interested in the region outside hydrocarbons,” but now there is a “boom” in private investment. In Morocco, manufacturing, textiles and tourism are all growing steadily thanks to investments in each sector, he said. In Tunisia, thanks to a sound education system, the private sector is able to rely on a trainable workforce, especially in the area of engineering — in fact, Airbus recently opened a plant in the country as the tourism industry expands. Blair described Libya as “exciting,” adding that the hydrocarbon sector will witness significant investments in the future, and that the retail space sector will also take off. While seeing serious potential in Egypt — whose manufacturing costs are a quarter of those in Turkey and with a strong manufacturing base as well as GDP growth hovering around 10 percent — he however lamented the over-concentration of foreign direct investment in the oil and gas sector. Blair underscored the importance of the recent Electrolux acquisition of Olympic Group, the Egyptian appliance maker, as a sign of changing times. “It is the first merger and acquisition in the consumer sector in the MENA region,” he said. European firms are rethinking their strategies and have begun realizing that North Africa, thanks to English and French being widely spoken and the region's proximity to Europe, is perhaps, in some cases, a better business proposition than other low-cost production countries, like China, he said. As a further example, he noted that Carrefour, the multinational hypermarket chain, will expand to have 20 outlets in Egypt. Blair is also confidant that Egypt — and not Dubai — will become the shopping capital for the Middle East based on current retail trends, noting that retail will receive massive investments in the next two to five years. Office space in Egypt, as well, is a hot sector to watch for investments now and in the future, he added. However, Blair sees the demographic structure as a “major constraint for government policy,” in particular in the areas of education, health and housing, which will spur demand for water and energy. Still, he is optimistic that these challenges can be adequately met through proper engagement with the private sector. Commenting on Algeria, Blair saw the situation as not so rosy compared to the rest of North Africa, expressing grave concern over the government's attitude towards the private sector and highlighting the ongoing imbroglio over the sale of Orascom Telecom's Algerian subsidiary Djezzy. Blair also noted the increasing number of private equity funds in both North Africa and the Gulf region as a positive development, but said that investment opportunities do not parallel the amount of capital that has been raised. Still, Blair characterized local markets in the region as being overly “protected.” Islamic banking in Africa Panelists at Exporta also discussed the budding yet underserved Islamic banking sector. According to Ehsaan Ahmed, head of Global Transaction Services at the Noor Islamic Bank, Islamic banking is growing between 15-20 percent, with Africa being one of the largest underexploited markets — worth an estimated $235 billion, citing Moody's research. The regions with the biggest growth trends, he said, are located in Africa, the Middle East and South East Asia. Currently the sector represents $500-700 billion in assets, Ahmed pointed out, but added that this figure is quite small when compared to the conventional banking sector. In Africa, there are currently 40 Islamic banking institutions, and 400 million customers. While the panelists agreed on the important role Islamic banking embodies, skepticism remained regarding the real distinction it has forged for itself relative to conventional banking. Amr Abou Zeid, head of Egypt Trade Centers at BNP Paribas Egypt and lecturer of Islamic finance strategies, noted that “heart of Islamic finance is not being developed,” as private equity remains near the $1 billion mark. He also asserted that Islamic banking is plagued by not putting into practice its own theory: academics “don't see the difference, besides the legal distinctions, between conventional and Islamic banking.” In his view, better accounting standards must be established. A current obstacle, Zeid noted, was the penury of regulations for Islamic banking in Egypt, which prevents the sector from being able to distinguish itself from conventional banks. This, he continued, has created a strong sense of confusion amongst potential banking clients. To rectify this, he called for the launch of business schools with a particular focus on Islamic banking, noting that even in France, there are currently six schools that offer specialized degrees and certificates, whereas in Egypt that number is closer to two, with Cairo University and Al-Azhar University playing that role. As well, he pointed out that the Islamic banking community is divided between two camps on the best way forward for the sector: either standardize Sharia rules or maintain a system of independent rules according to each bank's philosophy or need. The Egyptian government, he said, should consider this dilemma before proceeding to develop and implement a set of regulations for the sector. He highlighted how the standardization of Sharia rules in Malaysia has helped “deepen” the market versus the Gulf Cooperation Council (GCC) states, where Islamic banks each have their own Sharia board.
