Visiting Egypt has for the last decade become an end of year adventure. But in 2025, I opened my investment travels in the land of the pharaohs. Cairo has long been my favourite, large African city to visit. It has mixed history, interesting people, good food, but most importantly Egypt has long been the African country with the most exciting, listed investment opportunities. Our newest team member, Investment Analyst Thomo Molatjane joined me this time.

At the same time, poor macro conditions, poor economic management, and bad luck (Covid and the Ukraine war), have resulted in currency headwinds that have eaten away at returns, when translated to US dollar. In fact, since the start of Covid the currency has lost around 70% of its value versus the US dollar.

Prior to 2016, Egypt was priced in line with other frontier markets. It traded on a Price-to-Earnings (P/E) ratio of around 10x. More recently, it has disconnected from other emerging markets and has started trading at a large discount. Currently the P/E is just 5x.

Following the rebasing of its currency in 2024, the macro situation has improved significantly:

• Foreign reserves have recovered (helped by a large investment from Abu Dhabi)
• The real effective exchange rate is back in normal territory
• Inflation has peaked (at 35%) and is coming down, currently 12%
• Allowing interest rates to start falling. The policy rate was 28% and is now 25%, with a long way to fall.

As a result of these conditions Egypt is back on a more level footing with other emerging markets. Of course, the long-term growth arguments remain in place, such as growing population, urbanisation and catch-up. Further, despite the 70% currency devaluation, in US dollar terms earnings growth from Egypt has exceeded that of other frontier markets, and even the S&P 500 over the last 10 years.

So, there is a strong argument that over time the P/E multiple can start trending back toward other emerging markets. For many years, Egypt has been the single, largest country position in the Old Mutual African Frontiers Strategy. Its devaluation and de-rating have not been helpful but we are optimistic that good returns are ahead.

Some of the investments in Egypt

Commercial International Bank: one of Egypt’s largest private banks. This bank focusses on gathering cheap deposits and investing in government treasuries. Currently it earns a return on equity (ROE) above 40%. Over the last five years, the ROE averaged 28%. Where it does lend, the non-performing loans are covered 3.3x by provisions. This means that each time there is a problem loan, 3x that loan has already been provided for. So when interest income slows as interest falls, the bank can release provisions to keep returns high.

Fawry: one of the few, relatively pure, fintech stories listed in Africa. It is very profitable, in an industry where many US funded start-ups are allowed to operate at loss makers for many years. This company is likely to show growth of 50% per annum for the next three years, driven by growth in electronic payments and the provision of new services.

Obour Land: one of the leading cheese producers, known for its quality and innovation. It sells soft white cheese in long life tetra pak cartons. Cheese is the main protein source in Egypt since it is cheap and easier to store than meat in a high temperature environment. The Egyptian consumer is struggling following the high inflation, but this will normalise.

Egypt is just one example of how African markets, while often volatile, offer unique long-term opportunities for investors who are willing to dig deeper. At Old Mutual Investment Group, we do not invest based on headlines – we invest based on rigorous, on-the-ground analysis and a deep understanding of local conditions. Across the continent, stories like Egypt’s are unfolding – markets rebasing, economies stabilising, and companies delivering real earnings growth in difficult conditions.

Africa is a continent in motion – urbanising, digitising, and expanding. And while the path may not always be smooth, we believe the long-term trajectory is one of growth, resilience, and return. The African investment story is not just alive; it is accelerating. And we are here for it.