Delta Shield Investment is an investment management firm that supports Egyptian entrepreneurs, offeing financial advisory, accounting services and more. Speaking to The Worldfolio, Neveen El Tahri explains the specific support it offers SMEs to help foster their growth and gives examples of some of the success stories the company has helped to create.
Given your involvement in SMEs, I want to ask you about the central bank of Egypt initiative to finance 350,000 SMEs with 200 billion EGP at an interest rate of 5%. Given your expertise, what do you think has been the impact of this measure?
When you have SMEs being charged interest rates of 18-20%, no business even makes 18-20% when they are identified as SMEs. The larger companies know that they have numerous projects that allow them to have cumulative ability to pay back such high interest burden. When you look at SMEs, they are startups. Their growth scenarios must be much more lenient for one simple reason: they’re ramping up their revenues, but their profits are not there yet. They therefore, tend to look at the need for financing, be it in the form of capital or debt. The problem with going to capital is that they are diluted at a very early stage. So the need of a presence of a financial mechanism from the banking sector is extremely important and at a low rate. From a country perspective, you need them to be involved and enthusiastic about their business to grow it. If you don’t do that and they’re diluted at a very early stage, then you don’t have this spirit of growing the companies and hiring people. I’m being told that recently the 5% is no longer being provided for the trading sector, but continues to be applied for the manufacturing sector. I agree. It should not be for the trading sector, but for the manufacturing sector to encourage local production as opposed to imports.
I think it’s a very interesting initiative especially given the floatation of the EGP and imports are now more expensive, but if you create this ecosystem in the country, you can be very competitive, especially if the SMEs can be more affected by external shocks. I think it’s a great initiative from the
What about the specific role you play within the SMEs ecosystem?
Let me start by saying that I started quite early in 2007. The starting point was having been very successful at working at the Egyptian stock exchange since it’s reopening in 1994. In 2007, the small stock market Nilex was created. It coincided with my daughter’s graduation. All of a sudden, I had all her friends come to me and ask me what they should do next and so on. To me, it was the young generation that’s well educated, has knowledge given the easy access of data at their finger tips. So I decided to focus on doing exactly what I did on the big exchange by creating an SME investment bank.
Even at that time, the SME focus was not an existing concept. I started nurturing these young people. I started by doing exactly that with these talented people, I would encourage them to go out and do their business, and we’ll back them in all of the business development services needed. First, you hire an auditor that takes you through the process of everything and we help the connections as needed. We create a joint stock company, because on the long term, this is a much easier well established legally. You can sell shares, bring in future partners, and so on.
Most importantly was how you put their vision into a projected format. You put KPIs, not ours but based on what they want to achieve. So, you structure them in knowing how to work on which plan and because of our financial background, it’s easy for you to direct the company into what we agree on at different stages. So it gives them the backbone of having a partner and makes them much stronger in term of capabilities. At a later stage, it’s easy for you to go to the bank with strong financial statements and all the needed proper documentation. Now is the growth timing. So you speed the growth by having customers and efficiency levels and that is where your connections come in, only as a referral and the company we partner with have to sell themselves and products directly to the potential clients. So we basically, start opening up the doors for them and our role as a VC is to follow up on them, we have internal accountants that go and make sure that what our new partners are doing is in line with what you have agreed to reach their goals. It’s like we are part of the company now. You give them all the services that are required to grow a company and make sure we are on track.
I’m interested in knowing how do you decide which companies to help?
Most of the time, when I have companies coming, they will have done something for example and failed and be feeling very weak. Absolutely no problem I’m even more comfortable with someone who has failed before because their eagerness to take it to the next level is a good thing. It’s never a waste of time to be nurturing and mentoring those companies that you choose. At the very beginning, I have an open book. Any company in any industry can come. 138 Pyrmaids is now 4 years old, I found that we’ve become the fashion hub because we were the first people to invest in a fashion company and take it forward. It has grown very big. Everything that has to do with fashion we are interested in.
We also have food, which is something that seems to always grow in our country if well managed. So, choosing the right team that can expand it to many branches and becoming a brand name is something big. I have Foool Tank, Feteera, Gedety and more in the pipeline. I have a number of companies that are really interesting. I love services very much because this is where employment opportunities are mostly found. We have a company called Total Fix that is in corporate and residential cleaning and maintenance; it is managed by a woman and today employs 240 people.
Creating jobs for people that usually found doing household stuff as not very prestigious, but putting it in a company structure and training and becoming employees has changed the mentality. Very much like Uber, people are now driving because it’s not shameful to be driving.
Given your international expertise, I wanted to ask you about Egyptian entrepreneurship. If I’m correct, your parents were diplomats and you have been travelling from a very young age. What do you think makes Egypt unique in terms of the entrepreneurial spirit? How does Egypt compare to the rest of the world?
Egyptians have unbelievable intelligence even though somehow they are not well educated. So it’s all about training. If I’m capable of training Egyptians, the amount of brilliance is just unbelievable. It just needs to be scratched right. So, even though they are not educated, they come up with amazing ideas. I think it partially comes from living in difficult conditions where you have to find a means to live. If you come from Venezuela, you’d understand when you have things that are tightening. You have to find ways to go around. It just comes with your DNA. I think it’s that nature that became part of our DNA.
We are a civilization. Civilizations have a lot of things that are embedded within your whole system without you even realizing that you lie on very strong ground. I always say, we create our firms. At the bank, I would do the job as an assistant manager, and when I’m promoted to a manager, I’m still sitting on the same chair doing exactly the same things, but you start ordering people around. We create them; it’s part of our culture.
In our culture we have these things that if you train people properly, it turns out to be an unbelievable asset. We lack a lot of things, but when put correctly, it’s amazing. That’s why when Egyptians travel abroad, they excel because you put them in a system. Once they’re put in the system, they know how to think outside that box. I think with this we only scratched the surface of entrepreneurship. I think it can go way further.