JEDDAH: KHALIL HANWARE
Published — Tuesday 22 July 2014
Last update 22 July 2014 2:15 am
“Since it was founded in 1976 by the late Salem bin Mahfouz, SEDCO has become one of Saudi Arabia’s leading groups in Shariah-compliant wealth management,” Moumina told Arab News in an exclusive interview.
Saudi Arabia has been a great attraction for foreign investors. Its foreign direct investment (FDI) continues to be strong, he said.
These are highlights of the interview:
What investment prospects do you see in Saudi Arabia?
Due to its good economy, the Kingdom has several prospects. Its strong GDP and purchasing power are good signs for investment in Saudi Arabia, especially in real estate, hospitality, religious tourism, medical and consumer items, and the manufacturing sector.
How can Saudi Arabia attract more foreign investment?
Saudi Arabia has been a great attraction for foreign investors. Its foreign direct investment (FDI) continues to be strong. Saudi Arabian General Investment Authority (SAGIA) has been facilitating and monitoring investments. With clear guidelines, SAGIA has been promoting partnership of Saudi companies with their strong counterparts — both locally and internationally. SEDCO is a good partner for foreigner investors due to strong corporate governance which is needed.
What solution do you see for Saudi Arabia’s housing shortage?
Construction of more houses for low- and mid-income people in growing areas. At the same time, there is a need for promoting awareness of transition (temporary) accommodation rather than permanent houses. The mortgage law has the potential to boost the real estate market from all ends.
What do you think is the impact of labor regulations on businesses?
Labor regulations protecting the interests of Saudi job seekers are good from the point of view of long-term economic growth. We all must take the responsibility to educate, train and enable Saudis for jobs.
Do you have any special advice for the youth?
Follow your passion in your studies by setting life’s objectives. Of course, they should focus on education and seek early work experience and training. They should aim to join companies in the well-organized sector for a good training experience and not very much look at the monetary gain. The youth should also understand the value of money. This could be done through the Riyali Program. Riyali financial literacy program has grown to become a national movement of youth empowerment that has been well received by the Saudi community and acknowledged by the country’s leaders.
Can you give a brief background about SEDCO Holding Group?
SEDCO Holding Group was founded in 1976 by the late Salem bin Mahfouz, and is recognized as a leading Shariah-compliant organization with a diverse spectrum of operating companies in industries, including real estate development and management, travel and tourism, hospitality, automobile leasing, casual dining, pharmaceutical, in addition to managing private and public equity holdings in Saudi Arabia and around the world.
What are the most important local and regional investment sectors for SEDCO?
SEDCO’s direct investments focus on the sectors of wealth and asset management, real estate development and management, hotel management, travel and tourism, automobile leasing, real estate professional services, property management, casual dining franchises, information technology services and health care.
SEDCO typically seeks to create new business or partner with large and medium-sized private companies with a strong track record of profitability and future growth potential. SEDCO also adds value to investee companies by assisting them in realizing their growth plans and applying strong corporate governance practices.
What are the business lines of the group? And what challenges does your company face?
SEDCO Holding’s business activities are widely diversified and fall under three main business lines — real estate, private and public equity holdings within Saudi Arabia and around the world, and wholly and partly owned operating companies. All of which operate according to Shariah laws and principles. Looking back on 2013, it was a very satisfactory period in terms of performance; targets were substantially increased from previous years and we were able to achieve them. At the same time, we continued to absorb the changes that have taken place while making further progress with the restructuring that is integral to our growth.
Can you elaborate on SEDCO’s business lines?
SEDCO’s operating company portfolios cover more than 20 operating companies in various business segments. These include: SEDCO Capital, SEDCO Development, Elaf Group, Auto World, Intimaa, Tarfeeh, Nahdi Medical Company, Red Sea Markets, Ewaan, Bonnon Coffee, Ejada, Al-Mahmal Trading, Al-Mahmal Development, Arabian Farms, Tazweid, Al-Nakheel Center, Tent Souk and others. SEDCO owns and manages a diverse portfolio of local and global real estate, ranging from prime city center properties in some of the world’s great capitals to vacant land with good potential for high-yield development. Global real estate assets include sites in the Americas, Europe, the Far East, India, GCC and Levant region. Local real estate assets include shopping malls, hotels, apartment blocks, office buildings, industrial units and prime undeveloped land across Saudi Arabia. Financial investments are split into public equity and private equity. Public equity portfolios span the globe and are managed using an active approach. Private equity is globally diversified by region, business sector, in management style and investment class.
Do you face any difficulties in proposing innovative solutions that are Shariah-compliant?
On the contrary, there is a growing global interest in Shariah-compliant products and services. When David Cameron unveiled the 200 million-pounds sukuk at the 2013 World Islamic Economic Forum in London, this made Britain the first non-Muslim country to launch Shariah bonds. This is a solid example of the global awareness in finding solutions in non-interest loan systems. SEDCO is among the leaders in providing Shariah-compliant investment solutions. Since it was founded in 1976 by the late Salem bin Mahfouz it has become one of Saudi Arabia’s leading groups in Shariah-compliant wealth management.
Did SEDCO face any challenges with their investments in the Arab Spring countries?
All companies with investments in “Arab Spring” countries faced challenges. However, our diversified investment portfolio combined with the work done by our risk management department with their extensive systems and controls to identify, measure, monitor, and manage risks has managed to help our investment performance and position them for growth in the future. An example would be Dar Al-Fouad Hospital in Egypt which despite the regions uncertainty has operated at roughly 90 percent of capacity throughout 2013, and is expected to exceed this figure in 2014.
Which country has opportunities?
The GCC as a whole and the UAE Expo 2020 plans will make an impact and open up several investment projects. Saudi Arabia is still a promising growth market which offers stability, economic expansion and the largest budget of SR855 billion for 2014. Saudi Arabia is the largest economy in the Middle East and North Africa, holding a 25 percent share of the Arab GDP. This is partly due to its geographic location, which provides easy access to export markets to Europe, Asia and Africa. The Kingdom also has a continuously expanding domestic market (annual population growth of 3.5 percent), which is adding to a young and consuming population with strong buying power.
What are your regional expansion plans for 2014?
Looking ahead, growth and business generation will remain a top priority. We plan to expand our investments in the Saudi market by venturing into new acquisitions with like-minded investors. This will help develop and diverse our portfolio. We are also examining potential joint ventures with international companies and are confident of bringing some of these to fruition over the next 12 months.
What are the areas you focus on for HR development?
In terms of people, our core asset, we are focused on building on our reward and accountability mentality, creating long-term incentives for executives and introducing special coaching and team-building programs. Adopting a best practice recruitment system and introducing iRecruitment (internal recruitment practice), creating career path guides to help employees focus on measurable development plans, and updating all job descriptions to reflect actual role expectation are the other areas. We have also taken a number of initiatives to improve the working environment such as ‘It’s better to take the stairs,’ which encourages employees to use the stairs instead of the elevators; other employee initiatives include the SEDCO football league and ‘green apples’ which highlights the benefits of healthy living. In 2014, the focus will be on work/life balance, teamwork and recognition.
In terms of corporate responsibility, what is SEDCO’s primary focus?
SEDCO’s social responsibility efforts focus on four pillars — its employees, the sectors it operates in, the environment and the broader community. Our flagship CSR program is Riyali financial literacy program, which was launched in September 2012 to address the need to educate the Saudi population on financial literacy and empower people with the personal financial skills required to achieve a desirable standard of living. Now in its second year, SEDCO’s Riyali financial literacy program has grown and is well received by the Saudi community and acknowledged by the country’s leaders. Riyali has won many awards, including Makkah Excellence Award in Social Responsibility in 2013.
You mentioned corporate governance. Can you tell us more?
SEDCO is a unique family business, which practices strong corporate governance. It is driven by the scale, scope and complexity of SEDCO’s businesses as well as the shareholders vision of a professional, transparent and ethical organization. It has been critical in building our reputation as a capable, ethical and responsive business group. We apply best practice in corporate governance, our board of directors comprises eight members, five of whom are from outside the family and are chosen from prominent local and international experts. Corporate governance has paved the way for future growth, including the ability to attract investors, both locally and internationally. It has improved SEDCO’s access to capital and financial markets. It has provided grounds for a smooth inter-generational transfer of wealth and growth of family assets. Furthermore, it has strengthened the confidence of shareholders in the management, and implemented better systems of internal control, thus leading to greater accountability and improved profit margins. It has also laid the ground for a clear separation between management and shareholders. The corporate governance process has enabled SEDCO to distinguish itself from many other regional family businesses, whose shareholders are frequently involved in the management of day-to-day activities. It has been recognized by the Institute of Directors as best-in-class for the region.