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PIF buys stakes in construction firms as Saudi boom continues

By Matt Smith
Nesma
The Saudi sovereign wealth fund has become a shareholder in Nesma & Partners Contracting, which is building this hospital in Jeddah

Saudi Arabia’s Public Investment Fund (PIF) has spent $1.3 billion buying “significant” minority stakes in four local construction companies, the sovereign wealth fund said in a statement on Tuesday.

The kingdom is enjoying a building boom, with projects valued at more than $1.1 trillion underway and a further $64 billion of construction contracts forecast to be awarded this year. 

The PIF’s investments will help the local construction industry expand capacity, improve supply chains, accelerate the adoption of advanced technologies and support Saudi’s Vision 2030 economic diversification plan, it said. 

The fund is now a shareholder in Al Khobar’s Nesma & Partners Contracting Co, Jeddah’s Almabani General Contractors Co and Riyadh’s El Seif Engineering Contracting Co and Al Bawani Holding Co. 

It did not specify how much it had invested in each of the four firms or the size of the stakes acquired. 

“PIF will enable the four companies to develop regional and international partnerships, which will help increase the adoption of the latest technologies and the transfer of knowledge from global engineering, procurement, and construction companies,” the statement said. 

Construction is one of 13 strategic local sectors the PIF has targeted for investment and expansion as of part of Vision 2030. It aims to invest at least SAR 150 billion ($40 billion) annually in the domestic economy.

“The ambitions of Saudi Vision 2030 and the Public Investment Fund are playing a key role in driving giga-projects and other major developments across the kingdom,” Ben Edwards, group head of cost, commercial and procurement at state-backed developer Red Sea Global (RSG), told AGBI earlier this month. 

“Many projects are emerging from the master-planning and design phase, which will feed into more tenders entering the market as focus turns to construction and then operations.”

Saudi construction activity was the highest in the world in the final quarter of 2022, with the kingdom described as a “leading light in the Mena region and globally”.

A new report by the Construction Activity Index of the Royal Institution of Chartered Surveyors (Rics) revealed that the 12-month projected profit margins of Saudi firms were a “clear standout metric” with a +62 percent reading.

This was the second highest reported since the survey began in Q3 2018 and up from the +49 percent reported in Q3 2022.

Saudi Arabia’s real GDP grew 9.0 percent last year and will expand a further 2.8 percent in 2023, S&P Global Ratings estimates.

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