Saudi Arabia’s Council of Economic and Development Affairs announced a new vision for the country in 2016 to reduce its dependence on oil, diversify its economy and develop public service sectors. Following the Saudi Vision 2030 framework, ethical and sustainable investment firm SEDCO Holding worked on a new group strategy, Focus 2025.
“We started comparing the sectors we work in and saw great potential,” CEO Hasan AlJabri says. “For example, the government wants the private sector to play a bigger role in health care and education. Health care and education are important areas for the sustainability and job creation for the country’s youth. We evaluated how to strengthen our investment in these sectors, in light of where we see ourselves and the Saudi economy in the next five years.”
Other sectors of investment include hospitality and tourism. Hasan feels that many beautiful, untouched areas of the country could use more tourist services. SEDCO plays a role in stimulating and adding value to tourism, particularly through its Elaf subsidiary, a major player in the Saudi Arabian tourism, travel and hotel market.
“In addition to the significant role Elaf is playing with Hajj and Omarh activities in Makkah and Madinah, the group plays an active role in tourism and entertainment in Jeddah through its two hotels and malls; The Hotel Galleria by Elaf, Elaf Red Sea Mall Hotel; and the Red Sea Mall, which is considered the leading mall in the western region,” Hasan explains.
“The government is driving more local tourism, which we think is a brilliant idea because it’s going to create attractions, strong local spending and new jobs. We are looking forward to playing a key role in the plans and projects driven by the government in tourism cities such as Abha and Alula, and others.”
The hospitality industry took a hard hit from the COVID-19 pandemic. SEDCO had to close hotels and restaurants temporarily in order to manage costs.
“We were putting out fires, especially during the first three to four months,” Hasan recalls. “We needed to safeguard our shareholders’ interests. We looked at the constituencies and asked, ‘How are we going to guarantee the wellbeing of our employees and the sustainability of their jobs while meeting client needs?’”
It was a temporary necessity, and SEDCO swung rapidly into action, creating crisis committees both at the holding company level and across its operating companies to get through the challenges. Its operating companies pivoted swiftly to continue serving customers through different refreshed business models and online channels. Now, many of its businesses are profitable again.
“We look positively to the future and can see the light at the end of the tunnel,” Hasan says. “Of course, some sectors will take longer, but we want to make sure that they are on the right track, that they are cautious about their expenses and focused on the disruptions and opportunities in their sector.”
You must have a balanced outlook and run a successful business for everyone involved in the long-term.
Despite the challenges, 2020 finished as a good year for SEDCO Holding. “The importance of exceptional corporate governance and a formalised investment policy was brought further to the fore,” Hasan says.
“The Group and its leadership have been adamant about adopting best practices in corporate governance, with an upgraded governance manual developed to reflect this commitment.
Partners in prosperity
SEDCO has been Saudi Arabia’s leading ethical and sustainable investor for more than 45 years. It was launched in 1976 by the late Sheikh Salem Ahmed Bin Mahfouz. It grew from a small trading and construction contracting business to “one of Saudi Arabia’s leading private companies and a global leader in Shariah-compliant ethical investing”. Its investments span businesses in the health care, hospitality, education, real estate and asset management sectors in its role as a leading institution driving prosperity for generations to come.
“Our resilience throughout the year is testament to our well-thought-out and executed strategic diversification, strong asset allocation and commitment to invest ethically and responsibly, guided by our Focus 2025 strategy. The company is proud to have developed its own highly successful, prudent, sustainable and responsible approach to investing, with Islamic finance principles.”
Hasan coined the term Prudent Ethical Investing (PEI) in 2013 to describe this union of responsible investment and Islamic finance principles. One such subsidiary of the group that follows the PEI model is SEDCO Capital, the world’s first Shariah-compliant asset manager, and also the very first Saudi Arabian firm to sign up to the United Nations Principles for Responsible Investing.
Hasan believes communication is essential to running a successful business, primarily through difficult times such as the pandemic.
“We have active communication across the board, including regular newsletters that go out to the staff, updating them where we are, what’s happening and where we’re going, as well as town halls where we invite everyone to meet online,” he says.
“We’re transparent with them about our risks and solutions. We must walk the talk that senior management is working hard, and share what we’re doing. I believe that strengthened the engagement of our employees during this period.”
Though times have changed, he believes in using a difficult circumstance as a learning curve and focusing on improving other aspects of the company. “Whenever you’re faced with a serious problem, you will find that there are issues that need working on,” he says.
“That’s why it is always essential to have adequate policies and processes in place to deal with these immediately.
“We’re working on reviewing our procedures across several companies. For example, if hotels are closed, why don’t we spend time improving our processes there, as well as training our employees or becoming better hoteliers? How can we use this time to make the best use of hotels in new ways?”
Hasan explains that the markets have changed for some of the company’s businesses, which gives it the chance to rethink strategies and focuses.
“It’s very important for us to look at all the components of the business and ensure success across the board,” he says. “As management, you can’t be driven by one thing, like satisfying the shareholders or only satisfying the employees or customers. You must have a balanced outlook and run a successful business for everyone involved in the long-term.”
Hasan’s perspective of a balanced outlook means good shareholder profits, ensuring staff sustainability and keeping customers loyal by providing them with good services and products. “I would encourage companies to be socially responsible, and to be driven by long-term gain rather than one-shot deals,” he says.
“A thriving business is transparent and has responsible governance. It is how you can keep companies healthy for a long time.” Since the pace is fast, Hasan believes companies need to review their strategy continuously. “We are dynamic,” he concludes.
“We must review the way we do business much more quickly. We cannot wait three to five years to review a strategy. “It’s good to always keep an eye on what’s happening, and if it requires change during that period, then we look at it. What’s more dynamic than that?”