Meed | PIF steps in to save construction again

PIF steps in to save construction again

8 February 2024

Commentary
Colin Foreman
Editor

Saudi Arabia’s Public Investment Fund (PIF) has stepped in to save the kingdom’s construction sector for the second year running, demonstrating the industry’s strategic importance as Riyadh drives progress on its Vision 2030 projects.

Almost a year ago to the day in 2023, the PIF announced that it had invested $1.3bn in four local construction companies to support the handling of projects across the kingdom. It acquired new shares in AlBawani Holding Company, Almabani General Contractors Company, El Seif Engineering Contracting Company and Nesma & Partners Contracting Company.

Buying into a quartet of industry heavyweights to increase market capacity was only the start. This year, PIF has announced an initiative that aims to resolve an age-old problem for construction companies: cash flow.

Effective cash flow management is crucial for contractors because of large upfront project costs and long payment cycles. The cuts in capital expenditure and subsequent slowdown in project activity following the collapse in oil prices in late 2014 resulted in most contractors in the region enduring cash flow problems, many of which remain today.

The financial strain of waiting for payments, while simultaneously covering project costs, has stifled growth and threatened the viability of ongoing projects at a time when Saudi Arabia needs to deliver a large volume of projects in record time.

This is why the PIF and National Infrastructure Fund (Infra) have created a construction finance programme to improve contractors’ cash flows and help the industry ultimately deliver projects more effectively.

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