WEATHERING THE STORM

Lebanon 2019 | FINANCE | INTERVIEW

Lebanon's long-term prospects outshine the current difficulties facing the market.

Romen Mathieu
BIOGRAPHY
Romen Mathieu has more than 25 years of experience in corporate transactions and family-owned businesses in Europe, the Middle East, and Africa. He is specialized in private equity, mergers and acquisitions, and corporate restructuring. He is co-founder and managing Partner of EuroMena Funds, chairman of Khoury Home SAL, chairman of ITWorx Ltd., and vice-chairman of Al Oyoun Al Dawli Hospital. He is also an independent board member of Chedid Capital Holding SAL and an independent advisory board member of MAN Enterprises SAL and a board member of First National Bank SAL and Sakson Holding SAL.

What is the history and mission of EuroMena?

We established EuroMena in 2004, when opportunities and prospects for growth in the region were strong. We set up a private equity fund with the help of the European Investment Bank (EIB) and other institutions such as the IFC and the French, German, and British agencies for development. Today, we manage USD350 million and are raising a new fund worth USD200-250 million. While regional conditions have deteriorated, EuroMena maintains its commitment to the region, becoming one of the few teams capable of investing in hostile environments, while still making returns to shareholders. EuroMena aims to develop the economy of Lebanon by tackling opportunities across borders and serving the diaspora. We see this as the main way forward for an economy as small as Lebanon's, but which can still count on a solid presence across the globe.

What is the key to your success?

Diversification. In order to mitigate risk, we have diversified our range of investments, both geographically and by sector. We invested in 14 sectors across 20 countries, and every company we invest in makes a regional impact. Thus, we try to build companies that are shielded from devaluation or local currencies. Beside MENA, we have an active interest in Africa, supporting Lebanese entrepreneurs on the continent. Every fund has a 10-year-long life, so we have a long-term interest in supporting the companies we invest in. Regional conditions in the last 15 years have been quite challenging, and investing in Europe would have been a more cautious choice. Nonetheless, MENA and to an even greater extent sub-Saharan Africa provide huge opportunities for development. It is great for us to be based in Beirut and to play a role in the development of the region; at the same time, we are cautious and have offices in each of the companies in which we invest, in case things at home turn for the worse.

What are the main challenges and opportunities for investments in Lebanon?

The high interest rates on deposits are currently the largest impediment to investments, since they generate a cash deficit and a liquidity ladder in the country. If the government implements the right set of reforms as it has committed to, interest rates will decrease and the long-term investment climate will improve. Yet for any foreign investor who can afford to wait, there are great opportunities available. Electricity, oil and gas, and real estate are but a few. Moreover, among all the countries we invest in, Lebanon remains the most investor-friendly place. It is the easiest country in the region to open a bank account or establish a company, and is the most open and liberal country when it comes to business. As such, it is easy to get shareholders from any nationality without any requirement for a Lebanese-majority board. Our tax and legal structures are also optimized for selling, and there are low fees and low taxes on capital gains. You can also distribute the proceeds of the sale, including capital gains, to all your shareholders in any country and any currency. Meanwhile, you can also readily take out loans or benefit from subsidiaries. Finally, Lebanon leverages its educated and highly skilled human talent, making it the perfect platform from which to develop business in neighboring countries. All the companies we invest in have the potential to achieve scale at the regional level.

What is your outlook for your investments in the retail sector?

I am also chairman of the retail company Khoury Home, the market leader in home appliances and decoration. This business has been severely affected by the crisis, mirroring the entire retail sector. Whenever these macro disasters strike, the retail sector takes the first hit. This is because the first victim of the crisis is deposits and loans, which spell a decrease in the purchasing power of consumers. The high interest rates on deposits have also encouraged people to put their money into deposits, rather than consumption. The suspension of the housing support from the Central Bank in 2018 also had a negative impact on our line of business. Finally, the war in Syria has further shrunk the market, limiting Lebanese exports. To respond to this challenge, our only strategy is to compress and limit expenses to achieve higher cost efficiency and weather the storm.