Saudi Arabia’s sovereign wealth fund, Public Investment Fund, is set to launch a five new investment companies, modelled on the Saudi Egyptian Investment Company (SEIC, in the MENA region that will oversee SAR90 billion (US$24 billion) of investment.
Bahrain, Iraq, Jordan, Oman and Sudan will see new PIF-backed vehicles, along with SEIC, according to Crown Prince Mohammed bin Salman speaking on the sidelines of the Future Investment Initiative (FII) annual conference in Riyadh. They will span a range of sectors, including infrastructure, real estate, mining, healthcare, financial services, food and agriculture, manufacturing, telecommunications, technology and other strategic industries.
SEIC’s story so far provides an insight in how PIF’s new vehicles will operate. Following the launch, Yazeed Alhumied Deputy Governor and Head of MENA Investments at PIF, said, "In light of the economic growth in the region, SEIC will capitalize on lucrative investment opportunities within a number of promising Egyptian economic sectors, which will also support the expansion efforts of Saudi businesses and other PIF portfolio companies. The strategic economic partnerships that PIF has established with many investors and leading companies are among the most fundamental elements of its success.”
It has so far invested in mature assets. On its launch in August, it bought up state-owned stakes in four Egyptian companies - Abou Kir Fertilizers & Chemical Industries, Misr Fertilizer Production, Alexandria Container and Cargo Handling, and E-Finance - for US$1.3 billion. This month, it scooped up a 34% minority stake in the e-commerce platform B.TECH from African Development Partners II.
Mahmoud Khattab, CEO of B.TECH, said, “Working with SEIC, B.TECH will continue to accelerate its innovative growth strategy, and its digitalization efforts, while scaling new business verticals and existing core operations. B.TECH will also invest in increasing financial inclusion efforts, supported by the growth of B.TECH’s digitally-enabled MiniCash consumer finance services, which will expand customer access to a wide range of financing solutions.”
Liquidity for regional investments will come from the influx of oil revenue as well as dividends from portfolio companies and divestments from some of the kingdom’s biggest companies. According to Bloomberg this week, PIF has been holding informal talks with investment banks about reducing its holdings in state-backed firms that are listed on the Tadawul, such as utility company ACWA Power, mining company Ma’aden, and the Saudi Telecom Company (STC), as well as listing more SOEs. It may also seek to monetize its 4% stake in national oil company Saudi Aramco.
The Qatar Investment Authority (QIA) and Abu Dhabi's ADQ are two other Gulf sovereign investors seeking to establish local investment platforms, with Egypt a notable target. ADQ set up a new office in Cairo in December 2021 to ramp up its investments in the country and support co-investments with The Sovereign Fund of Egypt (TSFE). The Abu Dhabi state holding company created a US$20 billion strategic investment platform with TSFE in 2019, targeting pharmaceuticals, healthcare, financial services, utilities, agriculture, and real estate, but to date less than a quarter of this amount has been invested.
In March, ADQ acquired about 18% of the Commercial International Bank (CIB) for around US$1 billion, as well as shares in Fawry for Banking & Payment Technology Services. The fund also acquired Egypt state-held stakes in Abou Kir Fertilizers & Chemical Industries, Misr Fertilizers Production Co. and Alexandria Container & Cargo Handling Co. Last September, it formed a consortium with Aldar Properties – a Mubadala portfolio company – to buy a 90% stake in Egypt’s Sixth of October for Development and Investment Company (SODIC), a real estate developer listed on the ADX. The state-owned investor acquired Egypt’s Amoun Pharmaceutical Company alongside TSFE in March 2021. In October 2020, ADQ signed a non-binding agreement with the Middle Eastern Lulu International Holdings (LIHL) supermarket chain, which could invest up to US$1 billion in expansion of operations in Egypt.
QIA is following in the footprints of funds run by rival Gulf governments, namely Abu Dhabi and Saudi Arabia, in what appears to be a bidding war for influence. As a small state that has often found itself isolated by its neighbours over geopolitical controversies, Qatar has tended to resort to more asymmetric methods, capitalizing on its economic power, energy resources and investment in the media. Earlier this year, it pledged US$5 billion of investment in Egypt, although so far there have been no announcements of significant acquisitions.