CAIRO: The Middle East and North Africa region and its neighboring South Asian market have seen an expansion in private capital investment as technological opportunities arise.
The region’s global digital revolution has caused growth in the its private capital industry over the past few years, according to the 2022 MENA Data Insight report published by the Global Private Capital Association.
Capital investments in the region had been declining up until recently as a result of weak returns and misuse of the first generation of funds.
Ever since the global digital revolution gained momentum a few years ago, the innovation hubs of the Middle East saw significant growth.
The COVID-19 pandemic played a critical role in accelerating the technological opportunities on which private equity investors relied on.
“The largest private equity PE deal in the region on record was in the tech space: Blackstone Group acquired UAE-based technology and visa outsourcing services company VFS Global for $1.1b in May 2022,” stated the report.
Governments in the region have been supporting the wave of technological advancements by monetizing legacy assets.
This enables governments to invest in the local startup ecosystem as well as diversify middle eastern economies away from oil and gas.
The largest recorded number of private equity investments deals between 2020 and the first half of 2022 were in the healthcare industry.
“Investment activity in the healthcare sector has been driven by deals for regional and global platforms launched from Dubai, home to the world’s first medical free zone,” stated the report.
Private capital investment into the MENA region’s healthcare, healthtech and pharmacies amounted to around $2 billion in the period between 2015 and 2022.
Despite the inclined healthcare investment activity, the demand for essential services has yet to be met.
Southeast Asia, a region with similar population levels, has raised over $7.4 billion through healthcare companies in the same timeframe.
The region’s venture capital investment activity also portrayed growth in recent years, with startups raising a record $1.1 billion.
“Startups from the region’s top innovation hubs – the UAE, Saudi Arabia, Pakistan and Egypt – together represent 89% of capital invested in MENA VC since the beginning of 2020,” according to the report.
An aggregate of $199 million worth of capital invested was recorded in the first half of 2022, compared to $66 million two years earlier.
The growth of Venture Capital was mainly led by fintech startups since 2020, with Bahrain’s crypto platform Rain in the lead raising $110 million Series B in January of this year.
The Fintech market alone has made up for 23 percent of Venture Capital investment in the past two years, indicating larger demand for digital payments, crypto investments and BNPL options.
The report added that, “Middle East sovereign wealth funds have emerged as amongst the world’s most consequential investors, with trillions of dollars under management combined, a number that continues to grow amidst the current energy crisis.”
The above-mentioned investors have been adopting more advanced tech techniques in making their decisions, as well as building teams to manage internal direct investments.
“Since COVID-19, SWFs have also poured into tech companies that are contributing to the global digital revolution,” added the report.