Investing in businesses in the Otef and the Negev: what to check before you invest

Three years after 7 October, the businesses of the Gaza envelope sell more than they did before the war. In the first half of 2023 they took in about NIS 8 billion; in the first half of 2026 the figure reached almost NIS 9.7 billion.¹ The region's population grew from about 60,000 to more than 65,000, four communities have not yet fully returned, and the southern recovery plan runs to 2028.¹

Fronterra Investments made its first investment in the Otef in 2022 and, after 7 October, stayed and rebuilt the businesses there. This page is written for a qualified investor weighing the south. It answers three questions: who invests in businesses here, what the state gives and what it does not, and what to check in a business before committing capital. It is about businesses; real estate and agriculture are channels of their own.

Fronterra Investments is a private equity fund taking control positions in profitable industrial and agri-industrial businesses in the Negev and the Gaza envelope, with enterprise values between ILS 20 and 150 million.

Who invests in businesses in the Otef and the Negev?

Private capital reaches the region in four forms. They serve different businesses and rarely compete for the same one.

• Support for small and medium businesses. Otef LaEsek is a business-support initiative set up after 7 October by the Jewish Agency, Clearmark and IVN. Accepted owners of small and medium businesses receive mentoring, workshops and help with state entitlements, free of charge.
• Growth equity for small businesses. Netzer Capital describes itself as providing "equity and hands-on support for small businesses across the Galilee, Golan, Negev, and Gaza Border Communities".
• Startups. SouthUp is the technology incubator of the western Negev, providing services and growth engines to startups operating in the region.
• Control investments in established industrial businesses. This is where Fronterra works: profitable plants, packing houses and processing businesses, most of them family-owned, with enterprise values between ILS 20 and 150 million, held as control positions and run from inside the operation alongside the owners who built them.

Fronterra and its partners have no holding in, or business relationship with, Otef LaEsek, the Jewish Agency, Clearmark, IVN, Netzer Capital or SouthUp.

What does the state give, and what does it not?

The state's tools for a business in the region are fiscal. A Preferred Enterprise operating in Development Area A pays 7.5% company tax against 16% elsewhere in Israel, and an Approved Enterprise there may receive a grant of 20% of an approved fixed-asset investment.² These are the published rates; whether a particular business qualifies is a question for its advisers.

What the state does not supply is the business itself. Zelkind:

"Grants help the balance sheet, not the business. Ownership and management are what make the difference."

A grant lowers the cost of a machine. It does not sell what the machine makes, keep the managers who run it or replace the workers who left. Those are the owner's work, and they are what a buyer is paying for.

What should you check in a plant in the south before you invest?

The first tests are the same as anywhere. Fronterra's, as Zelkind set them out in our first update: the people first; then solid unit economics, healthy revenue distribution and close to zero debt; the preferred deal is a good business with no succession. His first indicators in a plant are leverage, how the management team has been built and kept together, and the business character of the owners.

Three checks are specific to the region.

Labour. Zelkind, in our third update:

"Labour is where it hurts. Industry in the south was built on a large Palestinian workforce, and replacing it with foreign workers is a slow process. The cost is felt in training, in retention, in added bureaucracy and in production delays. Margins absorb it first, and prices follow."

Status, not geography. The reduced tax rate and the grant follow the enterprise's approved status, not its address. Before a model relies on either, check that the business actually holds Preferred or Approved Enterprise status, and what that status covers.

Grant conditions and clawback. A grant comes with conditions, and some of them bind whoever owns the business next. Check which conditions apply, what triggers repayment, and what the buyer takes on with the asset.

The numbers say the region sells more than it did before the war. Whether a business in the south is a business case is decided the way it is decided anywhere: by the people, the economics and the debt, and here also by the labour, the status and the terms of the grants.

Sources

1. Idan Eretz, "Three years after 7 October: how far has the economy really recovered?", Globes, 7 October 2026, republished on N12 (Hebrew), read 25 October 2026.
2. PwC Worldwide Tax Summaries, Israel, read August 2026; the rates as published on this site's home page. Not tax advice.