More and more private equity players are seeking to capitalise on opportunities in Egypt, Morocco, Algeria and Tunisia by raising funds dedicated to investments in the region.

SGAM Alternative Investments recently held a first close of its North Africa fund on €100 million, halfway towards its target size of €200 million. The fund, SGAM AI Kantara, will target expansion capital and buyout opportunities in Morocco, Algeria, Tunisia and Egypt, and will also make some investments in Jordan and Lebanon.

Abdellatif Imani, who heads the fund, thinks that the region's attractiveness as a private equity destination is driven by the thriving economies of countries like Morocco and Egypt. Says Imani: “The economies of North Africa are booming, but for quite different reasons – each country has quite unique economic attributes.”

Egypt, Imani argues, has three unique attributes: it is the region's largest consumer market, with a population of some 70 million, and it is geographically near to the oil rich economies of the Gulf region. And it also profits from substantial inflows of cash from the US, with which it has a strong relationship.

Morocco, he adds, “boasts free trade agreements with the US and with Europe, while Tunisia is probably the biggest export country in the region.”

Most private equity players make one-off investments in the region rather than raise dedicated funds. One such player is Actis, which recently invested $30 million in Candax, an oil and gas exploration company based in North Africa.

Despite all the attractions of booming economies, North Africa is not that accessible to private equity players. Explains Imani: “95 percent of companies in the region are family owned. This trend is particularly prevalent in Morocco, Egypt and Tunisia, and it makes the market difficult for outside investors to break into.” Investors should be optimistic, but cautiously so.