Since its establishment in 2018, TSFE has become a trailblazer and a model for strategic funds in Africa and beyond. After establishing dedicated subsidiaries, the Egyptian fund has been busy investing in domestic assets and attracting foreign investors, all of it with a Sustainability angle. We were delighted to hear more about the fund’s plans from its CEO Ayman Soliman.
[GSWF] Can you please walk us through the rationale and process to set up TSFE?
[TSFE] Egypt was very careful about the set-up of the fund, considering the characteristics of our economy and demographics, and that we did not have abundant capital markets. The actual law for the fund was passed in 2018 and I was just appointed in October 2019. We were hit very hard by Covid-19 six months into the job, so we could only start proper operations and activities in the third quarter of 2020. So, TSFE is only 2.5 years old now.
[GSWF] How much capital was TSFE created with, and how much is it currently managing?
[TSFE] TSFE was established with issued capital of EGP 5 billion, with a callable capital of up to EGP 200 billion (US$ 12 billion then). Together with the Board of Directors, we took the decision to double the authorized capital to EGP 400 billion, with the ultimate goal of reaching EGP 1 trillion. We are financed in three different ways: (i) cash from the Treasury; (ii) transfers of assets from the government; and (iii) third-party capital that we do not own but manage. Our current AuM is EGP 60 billion, or US$ 2 billion at today’s exchange.
[GSWF] How do you define TSFE and what are your main mission and vision?
[TSFE] We are not a promotion agency but a strategic fund that pursues a partnership model with a strong foundation around ESG. We are a minority investor by design since we manage seven verticals and need to leverage specialized managers with track record. Our multiplier ratio is now 7.5x (we attract 7.5 dollars for every dollar we invest), with 2/3 coming from overseas and 1/3 from within Egypt. We leverage international partners such as ADQ, PIF and QIA; and regional networks such as ASIF, EMENA and OPSWF; and this model has been very successful to create a “SWF-to-SWF diplomacy” and de-risk assets, with a strong bias towards the infrastructure sector.
[GSWF] What do you think are the advantages of Egypt and Northern Africa as an investment destination?
[TSFE] In the context of global uncertainty, geopolitics, and stagflation, we believe Northern Africa presents great opportunities for investors. In particular, we believe the region has a great potential for and pipeline of infrastructure, connectivity, and renewable assets. By partnering up with other domestic bodies, such as The Ministry of Electricity and The Suez Canal Economic Zone, we have created a euphoria to crowd-in foreign investors, e.g., the world’s largest green hydrogen project, which has received interest from 20+ consortia.
[GSWF] Are Gulf-based entities and funds the main target for TSFE?
[TSFE] The deals with Gulf funds are perhaps the most visible and sizeable but we have many others that may not be widely covered, e.g., our largest partnership on green ammonia is with Norway’s Scatec, a leading industrial player with the financial support of MIGA (World Bank Group). Also, European SWFs are not designed in the same way as the Gulf funds, so it is more difficult for us to partner with them.
[GSWF] Can you please walk us through TSFE’s different subsidiaries and multi-sector approach?
[TSFE] We decided to establish proper legal entities for those industries that needed specific expertise and focus, namely:
Infrastructure & Utilities: this is our main sub-fund, given the wealth of Egypt in infrastructure assets across sub-segments;
Tourism, Real Estate & Antiquities: tourism used to be 1/3 of our GDP and we needed an ecosystem to foster capital in real estate;
Financial Services & Fintech: including our acquisition of 76% of Arab Investment Bank along with EFG Hermes; and
Healthcare & Pharma: including a recent investment in BHI and a platform for pharma distribution and trade services.
In addition, we maintain three industry verticals where we leverage our partners for food & agro, manufacturing, and education sectors.
Lastly, we recently created a pre-IPO fund across industries to secure an anchor investor and/or industrial partners to turn around businesses and get them ready for capital markets. We are looking at over 34 assets that may follow this path.