Saudi is making business magic will all cards open and using no sleight of hand.
It’s simply making its investment intentions crystal clear, be it Aramco’s creative fundraising though planned partial or full acquisition of PIF-owned SABIC, raising its stake in Tesla to 5%, filling oil production gaps at times of uncertain supply or demand or the creation of a new investment technology fund.
Saudi is game and investors, on the fence or not, should take notice, as a future is being shaped today, now.
$1bn venture capital fund
You heard right. $1bn. Saudi’s Aramco is considering a $1 billion venture-capital fund to invest in international technology firms, according to people familiar with the proposal, the Wall Street Journal reported and published by Private Equity News (PEN).
Aramco is also weighing opening an office in Silicon Valley or elsewhere in the U.S. to generate deals, the people said.
“Aramco already invests in start-ups and high-growth firms in the energy space via its $500 million Saudi Aramco Energy Ventures fund and the Aramco Entrepreneurship Center, which has roughly $200 million to deploy early-stage capital in local Saudi companies,” said PEN.
Saudi NEOM, a $500bn 100% renewable city by the Red Sea, serviced entirely by robots, embodies Saudi’s Tech vision of the future.
The kingdom is investing in tech companies and new technologies that can balance a decline in oil demand, with some estimates saying peak oil will arrive in 2023, much earlier than previously predicted.
Aramco has committed $65 billion to two outside funds—one for infrastructure investment managed by Blackstone Group LP and $45 billion for a technology fund led by SoftBank Group.
Last month, Aramco paid $1.74 billion for the 50% it didn’t already own in the Dutch high-tech tire maker Arlanxeo.
Aramco and Saudi energy ministry officials have held talks on developing data-center hubs with U.S. technology companies Alphabet Inc., and Amazon Web Services.
According to OilPrice.com, Aramco is also investing in oil, Saudi’s main income stream.
“Saudi Aramco awarded Baker Hughes a major services contract to help boost production at the Marjan oil field,” said OilPrice.com.
“Saudi Arabia is aiming to boost production capacity by 1 million barrels per day by 2023 at a handful of offshore fields in order to offset declines from mature fields.”
The Saudi Public Investment Fund (PIF), owner and custodian of Aramco shares, placed over $4 billion on Silicon Valley startups including Uber Technologies Inc. and Magic Leap Inc.
Business Climate in Saudi
Businesses in Saudi Arabia are significantly more optimistic about revenue growth and business opportunities than last year, published the Saudi Gazette (SG).
Quoting the EY (Ernst & Young) Growth Barometer, an annual survey of entrepreneurs’ and middle-market leaders’ growth strategies, the study revealed that 33% of middle-market businesses in Saudi Arabia anticipate over 10% growth this year, and 6 in 10 are targeting a growth of 6-10%, a 24-percentage point jump compared to the results of last year’s survey.
“In a major shift in opinion, over one third (35%) of Saudi respondents regard regulation as the top driver of innovation, up 28 percentage points compared to last year,” said SG.
“Meanwhile, global confidence has strengthened in the last 12 Furthermore, this year just 6 out of over 2,700 (0.2%) respondents are looking at negative growth (compared to 5% last year). More than one in four companies (27%) plan double-digit growth (marginally down from 2017, when 30% of companies were in this high growth band).”
The International Monetary Fund’s 2018 GDP growth forecast of 1.7% falls short of these expectations.
Approximately a third (34%) of Saudi companies surveyed currently rely on bank finance for funding, but more are looking for funding through capital markets.
“Almost three-quarters (73%) of executives are considering an IPO – another sign of burgeoning business confidence, said SG.
The survey showed Saudi Arabian business leaders are on a hiring spree with 58% looking to recruit more full-time staff.