Equity firms face talent shortages

A shortage of talent in the fast-growing private equity industry in the Middle East and North Africa region is leading to major losses and may eventually cause the sector's collapse, experts said.

However, they believe a lack of skilled staff was a short-term stumbling block and the problem should become less grave as the industry matures.

Rami Bazzi, principal Private Equity at Injazat Capital, said: "The PE business is about the quality of professionals in the fund manager's team. Though we don't have exact figures yet of the losses sustained because of lack of people but the absence or shortage of talent could not only lead to losses but also to complete failure."

According to a report by Deloitte, private equity is witnessing strong growth on the back of increased liquidity in the region and will continue to do so, but there should be enough professionals to handle it.

Hany Shawky, director of Global Capital Partners LP, said: "Getting good management skills into the region is tough and has been a recurring theme.

"We are not worried about money – it's coming. But the biggest threat is [the lack of] manpower and professional talent. Cost of living is very high in the Gulf now and we have to implement new ways to retain people," he said.

Nick Careless, managing director of recruiters AP Executive, said: "Currently, on the hiring front, the demand for professionals is high but it's mainly top-level professionals who have been taken on. They are only just thinking about building up their teams now.

"There are many new people with really no hands-on experience so we need time to build such a pool of talent. Moreover, there is a lot of competition from other markets. Countries such as India and China are growing phenomenally and people are migrating to these regions.

"We recruit a lot of people from Egypt and India but now it's difficult getting people from there as their pace of growth in private equity is very fast. However, the good point is that as international companies are cutting jobs people may want to move here and that's an opportunity for us," said Nick.

Alwaleed Abdelrahman, senior vice-president of private equity at Abu Dhabi Investment Company, said: "Industry people need to be together and we need clarity of direction about where the market is heading and we should get managers who understand our language."

Abrar Mir, CEO of NBD Sana Capital, however, believes a slowdown in the West did not necessarily mean economies in the Gulf could take the advantage of the pool of talent there.

"Yes, we talk about the decoupling situation – where the West slows down and emerging markets develop but economic woes in the West may actually worsen and we are worried about our state of valuations. We often ask ourselves if there is going to be a slowdown here. There will not be a break but at some point in time, it may trickle in," Mir said.

Nevertheless, experts are upbeat about the prospects of the industry in the region. Private equity firms from the Middle East and North Africa are managing in excess of $13 billion (Dh47.7bn) and are playing an increasingly significant role in the creation of the millions of extra jobs needed in the region over the next decade.

Analysts at Ithmar Capital said the region would witness continued growth for private equity in 2008 due to privatisation and re-engineering of family businesses.

Lack of talent is one of the few problems that the industry faces but there will be no slowdown in the growth that private equity has experienced in the past few years.