The Abraaj Group is making headlines in the international media because it is alleged to have mishandled a $1 billion health care fund created by global financiers.
The Abraaj Group seems to be breaking the invisible corporate glass ceiling and hurting many international interests.
The Abraaj Group, hailed as the biggest private equity dealmaker in the Middle East, is one of those companies that often make headlines in the international media, but mostly for the wrong reasons.
This time again Abraaj stole the limelight when it was allegedly found mishandling a $1 billion health-care fund, which it had received from such well-known global investors as the International Finance Corp (IFC) and the Bill & Melinda Gates Foundation, the largest private foundation in the US.
To know the whereabouts of the missing money, Deloitte, a UK-based multinational professional services network, was officially invited to intervene, reportedly by Abraaj itself, to help it stem the fallout from the dispute and to sort out looming money matters that seem to bring down the Group’s diminishing credibility.
In February, Arif Naqvi, the founder and group chief executive of The Abraaj Group, had to resign from the Group’s Fund Management Business and was replaced by Omar Lodhi, the head of Abraaj’s Asian region. The move, according to www.abraaj.com, the official website of The Abraaj Group, was a part of the Group’s re-organisation exercise aimed at optimising its overall performance through enhancing governance and promoting accountability to give more credibility to sustainable growth in the future.
“I am handing over the reins of the fund management business to very competent people who will enable the firm to grow to great heights,” said Arif Naqvi in an interview with the Financial Times.
“And allow me to focus on what I want to do — how to bring private capital to meet the problems of the world,” Naqvi added.
Behind the façade of ‘ business as usual,’ however, there was something else that made such a ‘routine reshuffle in the company’s top hierarchy’ more than a desperate attempt to save it from further ruin, which seems inevitable at the moment.
Founded in 2002 by Pakistan-born Arif Naqvi, a recipient of the Pakistan civilian award ‘Sitara-I-Imtiaz,’ the UAE-based firm is one of the largest private equity groups operating in the emerging markets. Currently, the Group has over $13.6 billion in funds under management ( FUM), invested in such diversified sectors as real estate, health care, clean energy, private equity and lending across Asia, Africa, Turkey and Latin America. The Group claims its $1 billion health-care fund focuses "on improving care in the fields of non-communicable disease and mother and child health in 10 cities, including Lagos, Hyderabad, Karachi and Nairobi."
The fund owns 30 diagnostic clinics, 17 clinics and 24 hospitals with over 3,200 patient beds, across Pakistan, India, Kenya and Nigeria. In 2008, Arif Naqvi, a graduate of the London School of Economics and Political Science (LSEPS), established the Aman Foundation, Pakistan’s largest private social sector enterprise that has been supporting sustainable development in the country in such key social sectors as education, nutrition and health care.
Despite being a nascent, privately-owned social sector enterprise, the Aman Foundation set an example of establishing a 14-storey Aman Tower at the city campus of the Institute of Business Administration (IBA) in Karachi in 2016.
A project worth Rs. 1100 million, the Aman Tower hosts a library, 8 classrooms, 2 lecture theatres, 4 seminar halls, visiting faculty residences, etc. A well-equipped modern education hub, the complex accommodates IBA's Centre for Excellence in Journalism (CEJ), Centre for Executive Education (CEE), Centre for Excellence in Islamic Finance (CEIF) and the Centre for Business and Economics Research (CBER).
Currently, the Abraaj Group has 66.4 per cent stake in K-Electric, which is commonly referred to as the corporate version of the erstwhile Muttahida Qaumi Movement (MQM), owing to the group’s mafia-style of organisation, coupled with fraudulent business practices that have turned the word ‘Abraaj’ into an abusive term the citizens of Karachi are quite familiar with.
As reported by the Financial Times, the sole reason behind Naqvi’s resignation was not his earnest willingness to pass the baton to more competent people, but he had to quit after a barrage of allegations were levelled against him for misusing the company’s health fund accumulated from the world’s leading investors, namely the Proparco Group, a French
development financial institution, the Bill & Melinda Gates Foundation, UK’s CDC Group and the World Bank Group’s International Finance Corporation (IFC).
Based on private financing, the fund invests in hospitals and in the health care sector and that too in some of the world’s more backward countries, such as Nigeria, Kenya and Pakistan. All over the world, the fund is cited as an exemplary model for replacing aid with affordable, accessible and quality health care, using financing accumulated through a variety of private and government-owned financial service providers.
However, Naqvi dismisses these allegations outright and blames a plethora of unforeseen political and regulatory issues that caused an unnecessary delay in deploying the money.
“We are working collaboratively on a range of issues with investors in our Health Care Fund while also preserving the Fund’s vital mission of delivering affordable, accessible and quality health care to underserved markets,” says the Abraaj Group.
As revealed by the Financial Times, some people have already raised their concerns about undue delays in returning funds that had been drawn down from global investors in the Abraaj Growth Markets Health Fund, which was not deployed owing to reported regulatory constraints in a handful of health care transactions.
To find out how part of the $1 billion fund was handled, the KPMG International, which is also the auditor of the Abraaj Group, carried out a detailed investigation, which, in the end, found no evidence of any wrongdoing or mishandling of funds, either on the part of Abraaj or its associated partners and investors.
However, the investigation was clearly rejected by investors on the grounds that it was conducted in a very short time and there was also a potential conflict of interest as KPMG happens to be Abraaj’s internal auditor. To sort out looming money matters, according to Reuters, Deloitte has now been brought on board by Abraaj to carry out a separate review of the embattled fund, while investors have hired the U.S.-based Ankura Consulting Group to determine whether Abraaj breached any agreements on money that was not invested.
Many financial experts interpret Abraaj’s sinking fortunes as an act of karma. However, one must look at the other side of the coin, as this is not the first time when a multi-billion financial conglomerate, hailing from a Third World Muslim country, is being spun into a gradual collapse.
Despite its phenomenal growth achieved within a mere 16-year period and considering its role in helping out poor countries stand on their feet in terms of socio-economic stability, the way the Abraaj Group, an initiative taken by a Muslim-Pakistani expatriate, is being dragged into financial controversies and legal wrangle by top international financiers, harkens back to the fate meted to the Bank of Credit and Commerce International (BCCI), a few decades ago.
The BCCI was also the brainchild of a Pakistani businessman. It turned out to be a huge financial success achieved on a global scale within a short time. Similar to Abraaj, the BCCI also focused on Third World countries and soon went to the wall while no fingers were raised at other international financial organisations with more severe discrepancies up their sleeves and glaring appropriation records.
This shows there is an invisible glassceiling that exists in the international corporate world and those companies that have a Third World background and dare to break the ceiling or are seen coming closer to the mark, fall flat one way or the other. The Abraaj Group story seems to be no exception.