EFG and GEMS to invest $300m in education sector in Egypt

The two firms form a 50-50 joint venture to invest in the North African country over 5 years

Abu Dhabi, United Arab Emirates - November 28th, 2017: GEMS Education students attempt to set a world record for the Worlds Largest Human Waving Flag. Tuesday, November 28th, 2017 at GEMS Cambridge International School, Abu Dhabi. Chris Whiteoak / The National
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EFG Hermes, Egypt’s biggest investment bank and GEMS Education, the UAE's largest private school operator, expect to invest around $300 million in education in the North African country over five years, a bank official said.

The 50-50 joint venture is targeting an internal rate of return of 25 per cent per year, Karim Moussa, head of asset management and private equity at EFG Hermes told The National on Sunday. The investment bank, which will establish a fund managed by its private equity arm to finance the investments, is targeting existing and new investors, including those from the Arabian Gulf and Egypt to participate in the venture, he added.

“There is a strong need in Egypt to build and invest in the [education] sector, build new capacity and invest...to upgrade the quality and offering,” said Mr Moussa, who manages around $5 billion across private equity and the asset management business. “Today’s market in Egypt is very un-institutionalised and highly fragmented, owned usually by family businesses that have no previous knowledge in K12 education.”

There are more than 600,000 students that enter schools each year in Egypt, a market that has around 21 million enrolled students, 10 per cent of which are in private schools, he added. EFG will announce its first investment in the coming weeks, and aims to focus initially on acquisitions in Cairo and Alexandria.

GEMS, which counts US-based private equity firm Blackstone and Bahrain sovereign wealth fund Mumtalakat as stakeholders, declined to comment on the deal.

Egypt, the Arab world’s biggest education market and most populous nation with a population exceeding 90 million, is becoming attractive to investors as the country undertakes reforms and woos foreign investors who left in the wake of the 2011 political uprising. The North African country is targeting $10 billion in foreign investments in the fiscal year that ends next month, which it aims to increase by as much as 25 per cent in the following 12 months, Egypt’s finance minister Amr El Garhy told Bloomberg last month.


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EFG Hermes is investing in education as a third vertical in its private equity business, which currently has investments in renewables and healthcare, said Mr Moussa.

GEMS is expanding its remit into Egypt amid plans to boost its student numbers. It currently has 47 schools and almost 120,000 students as of February 28.

Last month the company said it's targeting higher average revenue per student and an increase in enrolment numbers in its 2018 financial year after posting a 5.2 per cent jump in the first-half earnings.

GEMS expects its full-year 2018 enrolment to increase 5.5 per cent year-on-year to 121,000, while average revenue per student is projected to climb by 4.5 per cent to $8,450.

The company signed a memorandum of understanding with Saudi Arabia’s Ministry of Education and Mohammed Alsubeaei & Sons Investments Company to explore expanding its network of schools further into the Kingdom.

Companies such as GEMS are benefiting from increased demand for schools as governments increase spending on education.

The total number of students in the GCC education sector is forecast to reach 15 million in 2020, rising at a compounded annual growth rate of 3.6 per cent from an estimated 12.6 million in 2015, according to a 2016 report from Dubai-based investment bank Alpen Capital.