Private equity leader Citadel Capital urges cautious optimism for MENA private equity

The primary question, Heikal said, is how much growth will slow in 2009 compared to this year. Although they are forecasting that the MENA region will grow two to three times as fast as the global average next year, both the World Bank and the International Monetary Fund have recently downgraded their outlooks for global growth.

Against that background, Heikal urged regional private equity players to exercise caution in the coming 18 months. The still unfolding global financial crisis and economic slowdown have left credit markets frozen and dampened public market valuations. Difficult fundraising conditions will further constrain private equity activity.

"In the next two to three years the global economic head winds will slow the region's private equity deal pace. There will be fewer deals, and they will be of a smaller size. Citadel Capital's platform companies, which span 14 industries — from cement to retail, agriculture and food products to the complete oil and gas value chain — are well positioned to weather the coming storm. Our emphasis in the coming months will be to help them meet their business goals in this challenging climate,"

Heikal said.

Heikal laid out a cautiously optimistic case for regional private equity, pointing to rising intra-regional investment, rising private-sector participation in GDP and investment and diversification away from oil.

"There was $18bn in intra-regional investment in 2006, more than 70% of it from the Gulf into non-oil countries such as Egypt," Heikal said. "From here, we all know the story: Billions of dollars in FDI have flowed into the region, and governments and the private sector alike have worked hard to improve competitiveness."

MENA equities markets have boomed, adding $550bn in new value — even after factoring in the market slump. At 315 million inhabitants, the Middle East and North Africa (MENA) have the third-largest population on the planet. With over $1.4 trillion in aggregate GDP, the region is the world's tenth-largest economic bloc, and continues to grow.

Citadel Capital, the leading private equity firm in the Middle East and North Africa, also participated in the PE World MENA conference's private equity leaders' roundtable: How are regional private equity funds influencing global investing?.