Arif Naqvi, the CEO of Abraaj Holdings one of the Middle East’s biggest private equity firm is stepping aside under a cloud of controversy. Naqvi ceded control of the fund-management unit of his Abraaj Group in February on the heels of allegations that money in the company’s health fund had been misused.
Abraaj said last month it has hired independent consultants (KPMG) to review its corporate governance and controls.
Four investors in the $1 billion Abraaj Growth Markets Health (AGHF) Fund managed by Dubai based Abraaj hired a forensic accountant to examine what happened to some of their money, the Wall Street Journal (WSJ) reported.
The Bill & Melinda Gates Foundation, the World Bank’s International Finance Corp. unit, and government-backed development finance organizations CDC Group PLC and Proparco Group pledged about a quarter of the fund’s money. Those investors have asked U.S. advisory firm Ankura Consulting Group LLC to audit the fund, the WSJ said.
Naqvi and the company denied any wrongdoing and blamed unforeseen political and regulatory hurdles for a delay in deploying the money.
“Given the lack of mature healthcare assets in growth markets and the need to develop Greenfield as well as brownfield projects, capital deployment is less predictable than that of a standard private equity fund,” Abraaj said in a statement.
“All capital that was drawn from AGHF investors was for approved Fund investments. Some capital was not used as quickly as anticipated due to unforeseen political and regulatory developments in several of the Fund’s operating markets. The terms of the Limited Partnership Agreement allow the Fund to retain called capital in situations where an investment is delayed but still approved and not cancelled. However, following discussions with investors, Abraaj returned the unused capital to all investors in the Fund at the end of December 2017.”
Abraaj announced in 2016 that it will spend up to $500 million in start-up capital for a mid-tier hospital business in Africa, tapping into demand from the continent’s emerging middle classes.
Abraaj said then that the group was well on the way to securing land for a 350-bed multi-speciality hospital in the Nigerian commercial capital Lagos.
The fund now says it had hit “roadblocks” in investments in Kenya, Nigeria and Pakistan, with the delays communicated to investors.
Abraaj said it is separating Abraaj Holdings, the parent company, from Abraaj Investment Management Ltd., which manages the private equity funds.
Naqvi will remain the chief executive officer of Abraaj Holdings. He will also retain a non-executive role on the fund division’s investment committee and remain its chairman.
No new capital commitments will be made until the reorganization is complete, Abraaj said.
Private-equity investors usually commit capital for five to seven years, making it a highly illiquid investment.
According to its website, the firm’s $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 24 hospitals, 17 clinics and 30 diagnostic clinics across India, Pakistan, Nigeria and Kenya with over 3,200 patient beds.
Abraaj attracts investors, including foundations, sovereign wealth funds and pension funds, pursuing higher returns alongside social goals.
DAVID IBEMERE
