Foreign investors are increasingly drawn to Egypt’s manufacturing sectors, with a particular focus on food production. However, a lack of qualified assets remains a key barrier, according to Moustafa El-Shenety, Managing Partner and Head of Investment Banking at Zilla Capital. “I have clear directives from foreign investors to locate scalable assets in food manufacturing, where they seek to acquire either minority or majority stakes,” Shenety shared. He added that investors are particularly interested in companies with strong manufacturing capabilities, export-ready products, and business models that emphasize import substitution.
Shenety highlighted a significant challenge: many companies lack scalable assets, while larger companies are often uninterested in further transactions. Egypt’s manufacturing sector, which represents nearly 15% of the GDP, is predominantly composed of private enterprises. However, official data reveals that over 90% of the private sector consists of micro-businesses with limited scalability, while only a small fraction of SMEs hold growth potential.
Is Manufacturing Headed for a Boom?
While obstacles like limited financing and reliance on imported raw materials have historically hindered manufacturing growth, recent government initiatives to support local manufacturing could bolster the sector’s attractiveness to foreign investors, Shenety noted. Egypt’s positioning as a potential export hub to Africa is seen as a key draw for investors. Additionally, Egypt’s recent IMF agreement, which commits the government to reduce its economic footprint, is expected to provide the private sector with greater investment opportunities.
Shenety emphasized that in recent months, the food manufacturing industry has experienced minimal public-sector interference, which he attributes to a new government approach shaped by past economic challenges and a desire to avoid further instability.
Egypt’s severe foreign currency shortage last year, which raised concerns of a sovereign default, was partly alleviated in February when the UAE signed a $35 billion investment deal for the Mediterranean resort development at Ras el-Hikmah.
Pharmaceuticals Poised for Growth
According to Shenety, pharmaceuticals are another sector likely to attract significant foreign direct investment. Following a June decision by the government to increase drug prices by at least 20%, the industry has regained momentum. “Last year, several deals in the pharmaceutical sector stalled due to government-imposed pricing restrictions,” he explained, adding that recent adjustments have revived investor interest. Zilla Capital is currently working on two major pharmaceutical deals, one of which is expected to close by Q1 2025.
