As the UK has been suffering under the annual deluge of rain which accompanies the Wimbledon tennis tournament, I slipped away for a sunny weekend in Marrakech. While Dan is spending his time battling faux rabid lobsters, I was battling very real snake charmers armed with Cobras which were wrapped around the necks of unsuspecting tourists including myself. It cost around 100 dirhams or 12 dollars to have the black, hooded serpent removed – a not so charming form of extortion.
The former French colony of Morocco is an easy three hour flight from London and only 14 miles off the coast of Spain. Its proximity to Europe and the widespread use of the French language are making the country very attractive to European private equity firms such as Soc Gen Asset Management and Actis which both have offices in Casablanca. The country is also developing as an offshoring centre for French and Spanish businesses in the same way that India is an offshoring centre for British and American companies.
Arabic is also widely spoken in this Islamic country and Gulf-based private equity powerhouses like Abraaj Capital, Dubai International Capital and Kuwait’s Global Investment House are investing huge sums in North Africa. And US firms Colony Capital and Carlyle Group, which has recently raised a US$700m fund for investments in the MENA region, are getting in on the action too.
In fact in early June there were two record breaking deals in North Africa. Colony Capital bought Tamoil, a Libyan oil company, for approximately US$4bn nearly three times the US$1.41bn record set by Abraaj capital when it bought the Egyptian Fertilizers Group a week earlier.
This morning I spoke to Andrew Brown the chief investment officer of SGAM Alternative Investments’ Kantara Fund, which targets expansion capital and buyout opportunities in Morocco, Algeria, Egypt and Tunisa. He says that he is looking for the same sort of investment opportunities in Morocco that he looks for elsewhere in the world. “But unlike local country specific private equity funds with around US$30m to US$50m to invest, SGAM AI has targets of around US$200m and we tend to go for a controlling stake and bring in our own local management talent,” says Brown.
In Morocco, there is a range of growing export led businesses. There is also a huge amount of real estate and infrastructure construction which opens opportunities for private equity houses to invest with contractors and engineering businesses. And Brown says: “Across the region and specifically in Morocco there has been an effort towards structural reforms which make foreign investment easier. We have seen significant positive changes in the investment environment over the last five years.”
Any investment in Africa whether it be the more developed north of the MENA region or sub-Saharan is met with the question: Where is the exit? Historically, the continent has been a difficult place to exit. But Brown says: “Stock markets are more active and liquid and that there have been a number of listings in Morocco. We try to grow Moroccan companies onto a regional platform which also makes them more attractive for trade sales.”
At this stage it is difficult for some private equity firms to consider countries such as Morocco as investment destinations alone but as a region the remarkable growth of MENA should not be overlooked. That is if you are brave enough to face the Kasbah in your quest for deals.