Z Capital Group (“ZCG”), a leading privately held merchant bank, has announced a landmark move to enhance its global footprint through a dedicated commitment to the Kingdom of Saudi Arabia (“the Kingdom”). As part of its strategic expansion, ZCG has pledged up to $2 billion to support the Kingdom’s burgeoning economy, focusing on high-growth small and medium-sized enterprises (SMEs), private equity, and critical infrastructure investments.

The initiative is slated to kick off in early 2025 with the introduction of a direct lending strategy aimed at providing essential capital solutions for Saudi SMEs. This dedicated strategy will focus on businesses with robust growth potential and experienced management teams, offering various loan structures, including secured term loans, revolving facilities, and mezzanine loans. These scalable financing options are designed to fill a critical gap in the financing landscape for Saudi SMEs, which are often underserved by traditional lending channels.

Beyond direct lending, ZCG has earmarked around $1 billion for private equity, private credit, and infrastructure investments across the region. The emphasis on infrastructure aligns closely with Saudi Arabia’s Vision 2030, a national development strategy aimed at reducing the Kingdom’s dependence on oil, enhancing its financial sector, and positioning it as a global hub for investment and innovation.

Expanding Presence in the MENA Region with Riyadh Office

In line with its commitment, ZCG has established a new regional office in Riyadh, which will serve as the operational hub for its Middle East and North Africa (MENA) activities. By setting up a local office, ZCG is strategically positioned to foster close relationships with Saudi businesses and government entities, supporting its ambition to bolster economic growth throughout the Kingdom.

To lead ZCG Arabia’s operations, ZCG has appointed Mohammed Aldekmary as Chief Executive Officer of ZCG Arabia. Aldekmary’s extensive background in the region, notably his tenure as a Senior Advisor at the Ministry of Investment of Saudi Arabia (MISA), where he championed investment initiatives for Saudi Arabia’s economy, underscores his deep familiarity with the local business ecosystem. Under his leadership, ZCG Arabia is expected to capitalize on opportunities in sectors critical to the Kingdom’s development, from asset management and consulting to technology solutions tailored to the regional market.

“ZCG appreciates the support from MISA over the last year and we look forward to cooperating in the future as we facilitate critical growth capital solutions to SMEs across the Kingdom of Saudi Arabia,” stated James Zenni, Founder, President, and CEO of ZCG. “At a time when SMEs in Saudi Arabia are vastly underserved by financing resources, we believe our commitment can have a transformative impact on high-growth businesses while delivering strong returns for our investors. We look forward to thoughtfully expanding our presence in this key international market.”

Mohammed Aldekmary, CEO of ZCG Arabia, added, “Our expansion into the Middle East and North Africa region reflects ZCG’s deep commitment to fostering economic growth and supporting the development of high-potential businesses. By offering tailored capital solutions to SMEs and establishing a strong local presence in Riyadh, we are positioned to drive impactful change and long-term value for both the Kingdom and our investors.”

Alignment with Saudi Arabia’s Vision 2030

Saudi Arabia has been vigorously implementing its Vision 2030 program, which aims to diversify the economy, reduce reliance on oil revenues, and create a more dynamic private sector. ZCG’s entry into the Saudi market aligns with Vision 2030’s goals to increase private sector involvement and foster an entrepreneurial culture in the Kingdom. Through its investments, ZCG aims to empower local SMEs by bridging the financing gap that has long hindered growth in this critical segment of the Saudi economy. By empowering SMEs, ZCG not only bolsters its own investment portfolio but also aids in job creation and the development of a vibrant private sector that aligns with the broader objectives of Vision 2030.

ZCG’s direct lending initiative targets the SME sector, which is expected to be a cornerstone of Saudi Arabia’s economic growth in the coming years. Saudi Arabia’s SME sector accounts for approximately 99% of private-sector businesses and contributes about 20% of the Kingdom’s GDP, with aspirations to increase this contribution to 35% by 2030. However, SMEs in the Kingdom frequently face challenges in accessing sufficient financing options due to strict banking regulations and limited collateral. ZCG’s entry into this space is timely, as the Saudi government has been actively encouraging foreign investment to support SMEs, which are instrumental to the Kingdom’s plans for a diversified economy.

ZCG’s Strategic Positioning for Global Growth

This $2 billion commitment to Saudi Arabia signifies a substantial step in ZCG’s ongoing strategy to broaden its global footprint. ZCG’s investment efforts in Saudi Arabia add to its existing operations in the United States and India, where the firm has offices in New York, Pune, and Mumbai. The Riyadh office will solidify ZCG’s presence in the MENA region and enable it to explore new investment opportunities in high-growth economies across the Gulf and North Africa.

ZCG’s investors include a range of major institutional stakeholders such as pension funds, endowments, foundations, sovereign wealth funds, central banks, and insurance companies. These investors seek diverse, high-return opportunities globally, and ZCG’s expansion into Saudi Arabia adds a promising new avenue for these funds, particularly given the Kingdom’s robust economic projections and the investment-friendly environment spurred by Vision 2030 reforms.

The Role of MISA in Facilitating Foreign Investment

The Ministry of Investment of Saudi Arabia (MISA) has played a pivotal role in transforming Saudi Arabia into an attractive destination for foreign investors. MISA has actively worked to reduce bureaucratic red tape, simplify business processes, and create incentives that encourage foreign capital inflows. By establishing partnerships with firms like ZCG, MISA aims to attract long-term, sustainable investments that can help develop the Kingdom’s infrastructure, technology, and innovation sectors.

MISA’s support is crucial to ZCG’s ambitions, as it provides both logistical assistance and valuable insight into regulatory considerations and potential partnerships within the Kingdom. By working closely with MISA, ZCG is well-positioned to identify and invest in high-potential SMEs and sectors that align with Vision 2030’s objectives, thereby contributing to Saudi Arabia’s transformation into a more economically diverse and resilient nation.

ZCG’s Broader Investment Platform: Private Equity, Credit, and Infrastructure

As a diversified investment platform, ZCG has achieved a robust track record over the past three decades in private markets asset management, business consulting, and technology development. The firm’s business model relies on its three main platforms, which serve as the backbone of its global operations:

1. Private Equity: ZCG’s private equity division has been instrumental in its investment strategy, focusing on acquiring and building high-quality businesses. With an emphasis on companies that demonstrate sustainable growth potential, ZCG’s private equity initiatives in Saudi Arabia are anticipated to target industries that align with Vision 2030’s strategic sectors, such as technology, healthcare, and logistics.
2. Private Credit: ZCG’s private credit platform provides flexible debt financing solutions, particularly to mid-sized companies that may struggle to secure traditional loans. This division will complement ZCG’s direct lending strategy in Saudi Arabia, offering additional financial instruments designed to cater to the unique needs of Saudi businesses.
3. Infrastructure Investments: As global demand for infrastructure improvements grows, ZCG’s infrastructure investment arm is poised to support large-scale projects that align with national development plans. In Saudi Arabia, infrastructure investments may encompass transportation, renewable energy, and digital connectivity, all of which are pivotal to Vision 2030.

The Road Ahead: ZCG’s Global Vision in Saudi Arabia

As ZCG establishes its Saudi Arabia office and gears up to launch its direct lending strategy, the firm is positioning itself as a key player in the Kingdom’s economic landscape. ZCG’s $2 billion commitment underscores its long-term vision and confidence in the Saudi market, which is one of the fastest-growing and most ambitious in the MENA region. The firm’s blend of private equity, credit, and infrastructure strategies aligns well with the Kingdom’s goals, enabling ZCG to contribute meaningfully to the Saudi economy and offering international investors a unique gateway into one of the world’s most dynamic markets.

By expanding into Saudi Arabia, ZCG is set to leverage the region’s opportunities and establish a stronghold that could drive its future growth across the MENA region. This milestone not only reinforces ZCG’s strategic growth ambitions but also marks a new chapter in the firm’s journey toward becoming a truly global investment powerhouse.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

31st October, 2024