MEII is in the process of raising a regional risk capital fund called Sharaka Capital Fund (the “Fund”) – “Sharaka” means “partnership” in Arabic. The focus of this risk capital investment vehicle is to finance Small and Medium Enterprises (“SMEs”) in Egypt, Morocco, Tunisia, Jordan and Palestine. MEII is targeting a first close of $50 million to launch Phase 1 operations in Egypt and most likely Jordan, or in another market where MEII has ongoing operations. MEII will seek a second close of $125 million for Phase 2 to grow operations, including additional target countries, followed by a final close of $250 million for Phase 3 to complete the Fund.
After three years of political upheaval following the 2011 resignation of President Hosni Mubarak, Egypt's political transition culminated in the 2014 election of President Abdel Fattah el-Sisi and parliamentary elections in 2015. With increased political stability, the economy started to recover in 2015 as the government scaled up infrastructure spending and undertook important measures to restore macroeconomic stability by moving away from universal subsidies towards a more targeted transfer program, taking measures to contain public spending, and increasing tax revenues.
Egypt’s macroeconomic and structural reforms to stabilize the economy put them in a position to enter the COVID-19 crisis with an improved fiscal standing. However, the repercussions of the pandemic have resulted in a decline in progress and have exposed longstanding challenges. These challenges include slow private sector activity and job-creation and elevated government debt-to-GDP ratio.
With an economy that is primarily reliant on agriculture, petroleum imports, natural gas, and tourism, it is anticipated that growth will accelerate to 5.0% by next fiscal year as the coronavirus pandemic recedes and tourists return.
Small and Medium Enterprises in Egypt
In light of the current situation with COVID-19, SMEs are up against exceptional challenges to make up for what was lost. In response to these challenges, President Abdel Fatah al-Sisi endorsed an agreement between Egypt and OPEC Fund for International Development (OFID) to launch the third phase of the micro, small and medium enterprises development project worth $95 million. The agreement was signed on June 22, 2020 and primarily targets youth and women. (Egypt Today)
Over the past decade, the estimated number of SMEs in Egypt has increased by roughly 2 million establishments representing 43.1% of total employment. In recent years, the SME sector has been a priority for the Egyptian government it has taken several measures in to encourage growth in this sector through financing it via initiatives to provide credit facilities, or through providing non-financial services for entrepreneurship.