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Ahmed Heikal

Chairman & Founder, Qalaa Holdings

Qalaa Holdings got its start in 2004 as Citadel Capital, and within just eight years it grew into the leading private equity firm in the Middle East and Africa. Today, it operates 46 companies in the region, operating in sectors such as energy, cement, agribusiness, transportation, mining and more. With more than 15,000 employees, Qalaa Holdings’ footprint in Africa, the Middle East and its home country of Egypt is undeniable. Here, Qalaa Holdings Chairman and Founder Ahmed Heikal explains the company’s development, competitive edge and strategic direction, and also gives foreign readers a glimpse into what makes Egypt an ideal investment destination today. 

Qalaa Holdings is celebrating 15 years of activity. As the company’s chairman and founder, could you talk about some of your biggest milestones and challenges?

The last 15 years have been marked by three distinct periods. First, from 2004 to the first quarter of 2008, there were four years of very rapid expansion fueled by liquidity of a global scale. Then, we had to deal with the global financial crisis followed by Egyptian political turmoil, which lasted from 2008 to the end of 2014. There were a lot of challenges during this period. However, it was followed by a progressively improving period that really became clear in late 2016. In other words, we had four years of sunny skies, eight years of storms, and now close to four years of clearing skies.

I would say the company’s first milestone – the one that made Qalaa what it is – was a deal that we closed in late 2004 with ASEC Group, that allowed us, as individuals and as a corporation, to build a substantial cash reserve. We invested roughly $2 million in the deal, and it has given us three-digit returns. That was followed by another important deal, which was the buyout of Egyptian Fertilizers Company, where we also did very well and were able to accumulate even more cash reserves. These cash reserves allowed us to weather the storms until 2016. The purchase of a Canadian oil and gas company also stands out as a milestone, albeit a negative one. Although it was a learning experience, the results were not good. Another positive milestone was the closing and hopefully the startup of the Egyptian Refining Company (ERC).

We now have 46 companies and every one of those 46 companies, save one, is growing and growing fast

How would you describe the differentiating factors that have contributed to the resilience of Qalaa during those difficult times?

I think the quality of people within this organization has always been exceptional, both in terms of knowledge and resilience. Our people are fundamental and bring a lot of passion to the organization. I always say I’d rather have 90% head and 100% heart in people than the other way around.

What are your priorities going forward?

At the moment, my three main priorities are: hiring and supporting fantastic people, investing in existing assets and delevering on a relative basis. Those are the targets for the next two to three years.  We want to make sure that the assets that we have are performing up to their true potential. We will do this by making small, incremental investments in those assets, and by making sure that we have first-class management structures and individuals. I don’t think you will see us making very large deals in these years or purchasing new businesses, as we are focused on expanding our businesses from within. This is not to say we won’t invest. On the contrary, we will be making many investments within our existing asset base. We now have 46 companies, and every one of those 46 companies, save one, is growing and growing fast. So we want to draw on that success and momentum. If you are growing your operations and keeping debt constant, the debt, relative to cash, gets smaller and smaller.

I believe the reforms that President El-Sisi has undertaken are breathtaking

How would you describe the investment environment in Egypt today?

There are a number of factors that make Egypt a better place to invest in compared with many other countries. Let us first acknowledge that globally, the situation is very challenging and I believe it will remain that way for a while in terms of global social contracts, economic growth and more. I don’t think there will be a quick fix. Egypt, in that sense, is something of an oasis.  I believe the reforms that President El-Sisi has undertaken are breathtaking. The president has used some of his political capital to start a program to lift energy subsidies, and I believe that’s very wise because those reforms are absolutely necessary. This reform even goes beyond energy, electricity and petroleum products, but touches many other aspects of the economy. This, together with the flotation of the currency, has been positive. Egypt has also been helped by a number of other factors. One is the geopolitics in the region, whereby Egypt is playing an important role that is being internationally acknowledged and supported. Not only is Egypt strategically located, but Europe needs Egypt. If some people were upset by the number of Syrians entering Germany, you can imagine that if Egypt had taken another direction, that number would have been much higher. Egypt has played an important role in making sure the floodgates to Europe are not open. On top of that, Egypt is playing a moderating factor in the Palestinian issue, as well as in a different global environment whereby China, the US, Russia and Europe are not exactly exhibiting the same level of cooperation as before. Egypt is playing its cards well. That, together, with an improvement in tourism, remittances and energy discoveries, all contribute to making Egypt stand out as an investment destination.

You spoke about how Europe needs Egypt. Can you speak about what this looks like, specifically with Germany in mind?

Egypt’s relationship with Germany has been very beneficial for both parties. The amount of contracts that German companies have in Egypt is significant. Our president looks positively on the involvement of German companies like Siemens in Egypt’s development. We also have a great relationship with the German Development Bank (KfW) and other German institutions.

We are bullish on the Egyptian economy and bullish on the role that Egypt is playing in Africa

What is the contribution of Qalaa Holdings in terms of moving the Egyptian economy forward?

We are bullish on the Egyptian economy and bullish on the role that Egypt is playing in Africa. I mentioned that 45 of our 46 companies are expanding and that we are deploying capital and our growing companies. Similarly, we are a good employer and will continue to be so. We are also doing a lot in education. We have several scholarships, of which there are three main streams: the Qalaa Holdings Scholarship Foundation, the ERC scholarship program, and a program where we take around 30 schoolteachers and send them to the American University for a one-year program. The scholarships are important for Egypt, the individual students, and are also critical for what we do. When we started early on in private equity, there was a lack of talent, which is why we began cooperation with the American University. We started a seed fund with them, which has produced around 3,500 skilled people in the financial service industry.

Do you have a final message to German readers?

As a company, we look positively at what Germany was able to accomplish over the last 40 years. Every time we have the opportunity for cooperation with German businesses, we take them seriously. As a general message, Egypt has made great strides since 2014, and as a local private sector player, ours is a message of encouragement for anybody who wishes to invest in Egypt. You can just look at the success that many German companies have found in Egypt, both on the civil and military side. There is cooperation in terms of defense, energy with companies like Siemens, the automotive industry with companies like Mercedes, and infrastructure with companies like HeidelbergCement. Egypt’s proximity to Europe is a very important factor. Egypt is stable and investment is safe.

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