Egypt’s education, tourism can drive post-Ukraine recovery: Tundra Fonder

By David Whitehouse
Posted on Tuesday, 4 October 2022 06:00

The Grand Egyptian Museum due to open in November can contribute to Egypt's tourism recovery. REUTERS/Mohamed Abd El Ghany

A long-term Egyptian recovery in place since currency devaluation in 2016 can resume after the war between Russia and Ukraine ends, Mathias Althoff, partner at Swedish frontier markets investor Tundra Fonder, tells The Africa Report.

Higher commodity prices have created pressure on the balance of payments and public finances, but poor sentiment has led to “deep value” existing in the country’s stock market, Althoff says.

Tundra Fonder, which has a five-star rating from Morningstar, looks for “structural growth” potential rather than cyclical or commodity-based exposure, and favours countries with large populations which can grow from a low base, Althoff says. Favoured themes are banking, consumer spending, infrastructure, health and education, and IT.

The fund, which had $207m under management at the end of August, has its largest African exposure in Egypt, which accounts for 8% of the portfolio. It also has a 3% weighting in Nigeria, and individual investments in Morocco and Botswana.

Egypt, Althoff argues, benefited from a “smart, brave” currency devaluation that secured financial support from the IMF. Economic reforms overseen by President Abdel Fattah al-Sisi, despite protests, have overall been accepted, he says. A further 14% currency devaluation took place in March. The finance ministry, he argues, “understands that there must be a functioning FX market.” The devaluation has been orderly and the Egyptian pound’s current band is sustainable, he adds.

The country is strongly positioned to be able to export to Africa, Europe and the Gulf, Althoff says. The economy will benefit from a post-Covid recovery in tourism, and a quick return to pre-Covid arrival levels of 8 million to 9 million tourists per year is realistic, he says.

Despite the fact that Russian tourists won’t be back in the former numbers any time soon, tourism will be helped by the opening of the Grand Egyptian Museum outside Cairo in November, he adds.


Tundra Fonder holds stakes in Cairo for Investment and Real Estate Development (CIRA) and Ghabbour Auto (GB). CIRA, Egypt’s largest private provider of educational services,  offers services from kindergarten to university. It operates 24 schools with 30,900 students and owns Cairo’s Badr University.

Egypt is Africa’s largest higher education market with over 3 million enrolled students. Althoff argues that the number of university places is insufficient to meet demand, and that CIRA will continue to benefit from Egypt’s young demography.

Education is “crucial for a stable, self-sufficient economy” and China’s education system has been the foundation of the country’s growth as an emerging market, he argues. Though Egypt has regulatory risks, “there’s no way demand for education will go down.”

GB Auto, which has operations in Egypt and Iraq, offers leasing, consumer finance, microfinance, leasing, factoring, securitization and mortgage finance. The company increased net income by 31% in the second quarter, even as the local passenger car market contracted due to import restrictions.

  • The stock market has failed to properly evaluate the company’s financing business, which is growing at an annual rate of between 40% and 50%, Althoff says.
  • The shares trade on a price to earnings (PE) ratio of between 3 and 4 times, he says, and are “extremely cheap. The market doesn’t appreciate the financing business.”

Bottom line

Any sign that war in Ukraine is ending is likely to trigger a surge in investor interest in Egypt.

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