Marwa Elmihy
Business Development Manager at Ahmed Mamdouh & Co. Kreston Egypt
Diverse MENA region needs tailored strategies for investment
January 3, 2025
The Middle East and North Africa region (MENA) is brimming with investment opportunities. However, it is a diverse market that requires a significant level of local expertise to navigate, as Marwa Elmihy of Kreston Egypt explains.
Investment trends across MENA
The interpreneur report has highlighted regional differences in how investment is approached in the MENA region. For instance, Egypt is most likely to use venture capital, while UAE and Egypt are most likely to use management buyouts, with UAE most likely to turn to private investors. The regional differences in investment preference can be attributed to a combination of factors, including cultural influences, economic structures, and government policies.
‘In Egypt, we have a growing entrepreneurial spirit supported by a youthful population eager to engage in startup ventures, a high-risk appetite but with many opportunities,’ said Marwa Elmihy, Business Development Manager for Ahmed Mamdouh & Co, an independent member of Kreston Egypt. ‘This enthusiasm aligns well with the venture capital model, while the UAE has a business culture that emphasises stability and long-term growth, making management buyouts and private investments more appealing.’
Government policies shaping investment approaches
Government policies and the overall business environment are also a big influence on investment approaches. The Egyptian government has been promoting entrepreneurship through implementing reforms with various initiatives and incentives, creating a conducive environment for venture capital investments. In the UAE, government policies favour private investments and management buyouts by providing a well reputed, stable regulatory framework, tax incentives, and protections that attract both local and international investors. Additionally, the UAE’s strategic position as a business hub in the region is more attractive to private investors looking for opportunities in a well-regulated market and solid business transactions.
Challenges in the MENA investment landscape
As global growth cools, the MENA region is facing more turbulent times. Increased cost of capital, currency volatility, and reduced consumer spending affect foreign and local investments. These factors have made borrowing more expensive, increased investment risks, and reduced business profitability, which has discouraged FDI and local investments.
Opportunities amidst economic challenges
However, a challenging environment does not mean that there is not money to be made. ‘Despite current global economic challenges, investment in the MENA region shows potential for growth,’ Elmihy notes. ‘Key factors include continued government support for economic diversification and infrastructure, possible recovery in global markets leading to more favourable capital costs, and the resilience of key economies like Saudi Arabia and the UAE. These elements position the region to attract significant foreign direct investment.’
The impact of the Belt and Road initiative
The Belt and Road project has had a significant impact in making the MENA region more attractive to FDI and there are still some huge projects to come online. So far, it has delivered enhanced transportation networks, as well as investments in energy projects, particularly renewable energy. These improvements have led to enhanced trade relations, with increased bilateral trade between China and MENA countries due to improved logistics and reduced transportation costs. The region has seen a surge in FDI from China, targeting critical infrastructure and industrial capabilities and growth in public-private partnerships.
‘Investments are mostly targeted at technology, healthcare, and education while supporting SMEs through improved infrastructure and financing,’ said Elmihy. ‘Geopolitically, the initiative is strengthening strategic partnerships between China and MENA countries, enhancing regional security and economic stability. Chinese soft power is also growing through cultural exchanges and technological collaborations.’
While the Belt and Road Initiative promises continued economic diversification and technological advancement, Elmihy warns that addressing challenges related to debt sustainability and local capacity will be crucial for its sustained success and mutual benefit in the region.
Growing demand for specialised advisory services
Despite these concerns, investors are flocking to the region, and Elmihy has seen a rise in demand for specialised advisory services such as FDI advisory and mergers and acquisitions support. ‘International firms are increasingly looking to us to provide guidance to market entry and due diligence, valuation and transaction support,’ she said. ‘There is also greater demand for specialist tax advisory and planning, such as international tax and transfer pricing to enhance efficiency and ensure compliance.’
Key strategies for local firms in MENA
When it comes to helping local firms secure funding, partnering firms need five key elements in their strategy, according to Elmihy. ‘If you want to ensure your clients are successful, then you need to be offer financial assessment and planning, market research and positioning, tailored funding strategy, compliance and risk management, and investor relations,’ she said. ‘Starting with a thorough financial analysis and strategic planning, moving to in-depth market research for effective positioning, and then tailoring a customised funding strategy. Internal numbers and projects should be audited to build tailored pitch materials.’ While global uncertainly may make the road a bit more rocky, the right approach to each market means investors and local firms can reap dividends.
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