Saudi Arabia’s education sector is the largest in the region, accounting for three-quarters of total enrolments in 2014. Reuters
Saudi Arabia’s education sector is the largest in the region, accounting for three-quarters of total enrolments in 2014. Reuters

Business

Gems and Saudi firm to invest up to $800m in kingdom's education sector

The UAE-based education firm's partnership will provide places for up to 130,000 students

Dania Saadi

October 25, 2018

Gems Education and Hassana Investment company, the  arm of Saudi Arabia’s General Organisation for Social Insurance have signed a partnership to invest up to $800 million over the next decade to acquire and develop schools in the kingdom.

The agreement will provide places for up to 130,000 students and create employment opportunities for 16,000 people, 40 per cent of which will be Saudi citizens, Saudi Arabia’s media office said in a statement late Wednesday.

The partnership, which includes the acquisition and upgrading of existing schools and construction of new facilities, was signed on the side lines of the Future Investment Initiative summit that ends in Riyadh on Thursday.

“Gems Education, which is among the world’s oldest and largest K-12 private education providers, is a strong supporter of Saudi Arabia’s Vision 2030,” said Gems chief executive Majed Al Mutairi.

“The Vision's focus on opening up public service sectors such as education highlights a commitment to developing human capital and allowing the private sector to enable long-term positive change for Saudi citizens.”

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Under Vision 2030, the kingdom is looking for greater involvement of the private sector in developing its education industry, which is growing at a rapid pace.

In Saudi Arabia, the total number of students is forecast to grow at an annual rate of 3.5 per cent to 11 million by 2020 from an estimated 9.2 million in 2015, according to a 2016 report from Dubai-based investment bank Alpen Capital. The education sector is thriving due to the rising school and college age population, high per capita income, and surging demand for quality education.

Saudi Arabia’s education sector is the largest in the region, accounting for three-quarters of total enrolments in 2014.

Saudi Arabia has more than 37,000 schools, 25 public universities with over 500 colleges, more than 65 private colleges, and several technical colleges, the report added.

“This partnership is driven by our view that the education market in Saudi Arabia is one of the most attractive growth markets over the long-term,” said Saad Al Fadhli, chief executive of Hassana.

“Benefiting from Hassana’s role as a long-term, financial and strategic institutional investor and Gems’ international expertise, both partners expect to create a strong, innovative and successful education platform in Saudi Arabia.”

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Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram

Rating: 2/5

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Started: April 2017

Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh

Based: Cairo, Egypt

Sector: transport

Size: 450 employees

Investment: approximately $80 million

Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Uefa Champions League quarter-final (first-leg score):

Juventus (1) v Ajax (1), Tuesday, 11pm UAE

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Co-founders of the company: Vilhelm Hedberg and Ravi Bhusari

Launch year: In 2016 ekar launched and signed an agreement with Etihad Airways in Abu Dhabi. In January 2017 ekar launched in Dubai in a partnership with the RTA.

Number of employees: Over 50

Financing stage: Series B currently being finalised

Investors: Series A - Audacia Capital 

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