Arriving at London's Wembley Stadium last year to see Sheffield United Football Club (SUFC) play in the semifinal of England's biggest football competition, co-owner HRH Prince Abdullah Bin Mosaad Abdulaziz Al Saud made a typically understated entrance. Nowhere to be seen were the flashy trappings of many modern club-owning tycoons. The team, in which he holds a 50% stake, loses to Hull City 5-3 in the FA Cup match, but they started out the season as underdogs, and their presence at the semifinal follows a string of upsets. You might presume the team was gifted to or inherited by the sports-mad royal, a grandson of Saudi Arabia's founder King Abdulaziz. But the Saudi prince earned it through old-fashioned hard work. In 1989, Prince Abdullah, now 49, founded what would become one of the Arab world's most successful tissue paper manufacturers (last year it had revenues of SAR757.7 million ($266 million)), a company he is still chairman of today.
“[As a prince] you have to fight strong perceptions. Everybody assumes that you have got it easy and everything was handed to you. You have a lot of money. That was not the case for me,” Prince Abdullah emphasises, at an interview in London several weeks before the big match. He admits money was not something his family had to worry about, but he was expected to create his own living when he came of age. “Growing up we had decent money, we never felt that we needed the money, we always travelled to good places, ate good food. I had a good car. I didn't think money was an issue.”
This perception of a life of wealth and relative ease flows from popular conceptions of Saudi Arabia's royalty, and Prince Abdullah freely admits it is prevalent in some families. King Abdulaziz Al Saud established the modern Kingdom of Saudi Arabia in 1932 and its transformation has been dramatic since oil was discovered in commercial quantities in 1938. There are around 15,000 living highnesses and royal highnesses, according to estimates, spread across six branches of a family tree. Just this January, Salman bin Abdul-Aziz Al Saud succeeded his brother to the throne.
Saudi Arabia remains the world's largest producer and exporter of oil with strong government controls over major economic activities. The petroleum sector accounts for roughly 80% of budget revenues, with the private sector responsible for 48% of gross domestic product (GDP). But with sudden drops in oil price, the kingdom's reliance on the resource has left it vulnerable, not to mention the atrocities of Islamic State to its north, and civil instability in Yemen to the south.
Current price fluctuations aside, all this oil wealth helps fuel the perception that Saudi Arabia, and its royals in particular, are awash with money. But Prince Abdullah insists his father, the late Prince Musa'id bin Abdulaziz Al Saud, was a deeply religious man who “didn't care that much for money”. Indeed, when we meet he is modestly dressed in slacks, a jersey and sports shoes. There is little outward expression of his royal status or personal wealth. He attributes his ambition to his mother.
It was a Danish professor at King Saud University, where he was an engineering student, who suggested there might be the potential to develop the paper and pulp industry in Saudi Arabia. “I went to a decent college, I was an honours student. But then when I wanted to get married and start the business, I did not have the money to do it. I knew then that I had to do everything myself,” he says. Even without family backing, it's hard to imagine a prince being short on the networks and social capital to get a business off the ground.
Not so, apparently. Prince Abdullah knew that the Saudi Industrial Development Fund (SIDF) would give an industrial project a 50% start-up loan. If he could convince a bank to stump up 25% and he pulled together 25% through his personal connections, he had a shot. A feasibility study estimated the total costs of establishing a pulp business would be around SAR1 billion – forcing a dramatic strategy change. “There was no way I was going to come up with SAR250 million on my own. So I thought 'What is the cheapest paper product I can do?' It was tissue paper.”
Even with a feasible business plan in place, the prince was about to discover his royal status wouldn't automatically open doors. When he approached the SIDF, he found another prince had previously applied for a loan, but his project hadn't gone well. “They were suspicious,” Prince Abdullah says, “but I think they saw how passionate I was about the project.” The loan was eventually approved and Prince Abdullah thought the banks would be a far easier prospect. Think again.
“We went to the 13 banks in Saudi Arabia and I was turned down by 12 of them. They would not give a loan to a prince because they thought 'If he doesn't pay [the loan] back then we cannot go after him,” Prince Abdullah says. They eventually secured backing from one Saudi Arabian bank and another outside the Kingdom. The final 25% came from Prince Abdullah himself and a cousin who agreed to contribute SAR10 million and loaned the business another SAR10 million. Finally in 1991, Prince Abdullah had his funding and could establish Saudi Paper Manufacturing Company (SPMC).
Prince Abdullah recruited a host of former classmates from King Saud University and kept costs low by doing everything in-house, even living with his in-laws to save money. “When I wanted to buy a paper machine, it was from an Italian company and it cost SAR45 million. I couldn't afford a big shot lawyer, so I brought in a cheap lawyer and I had to lead the contract negotiations with them,” he says. On another occasion, he and his colleagues analysed 2,000 items from five suppliers line-by-line to get the best price for their contract.
Fortunately for Prince Abdullah and his backers, the business turned a profit in its first year. A fear of being imitated out of business (a common issue in Saudi Arabia) pushed him to aggressively double capacity within a year and a half of opening. This fear of competition inadvertently led SPMC to launch the Saudi Recycling Company (SRC) in 1996 – the first paper recycling business in Saudi Arabia, which has since grown across the Middle East.
“Hard work was key. There would be 16-18 hour working days for me. It didn't matter if I was sick or if it was Friday or Saturday. I would work every day. I had no life,” he says.
SPMC now has three main companies based in Saudi Arabia: Saudi Paper Manufacturing Company, Saudi Recycling Company and Saudi Paper Converting Company. It also runs wholly-owned paper collection and recycling operations in the United Arab Emirates, Morocco, Bahrain, Jordan and Algeria.
Prince Abdullah, who today holds a 40% stake, admits that it has not all been smooth sailing. Steady annual revenue increases in 2010 and 2011 were dented in 2012, rose again in 2013 to SAR819.7 million, but dropped 7.6% last year. “We have not been able to [build production] the past three or four years,” admits Prince Abdullah. “We have been through some tough times.”
Despite the bumpy road, especially in the early stages, Prince Abdullah is well aware that royalty isn't always a hindrance. “It comes with benefits. For instance if you are 22-years-old and want to see the Minister of Industry, I think it is easier to do that if you're a prince! If you want this done or that done, it has some benefits and some disadvantages,” he jokes. But he adds a caveat: “I think being a prince can be a curse if you don't quickly grasp that being a prince is not enough to have a good life,” he says, turning serious once more. “You have to work as hard. You have to do something. Nothing big will be handed to you.”
Fifteen years after he started the business, Prince Abdullah felt it was time for a change. “I didn't find the energy to put the same hours and work the same as I worked before. I always liked to work under pressure, when I started it was always do or die. But when you know that you have money, you know that you'll survive. I didn't have that incentive as before.”
Prince Abdullah listed SPMC on the Saudi Stock Exchange in 2006 with paid-up capital of SAR240 million. “The advantage of going public is that it's more sustainable than when you're private. [There is] more discipline in the company through the committees you have,” he says. The decision was driven by a combination of succession planning, to fund a property purchase in the US, and to ensure all his wealth wasn't concentrated in one asset. “When you go public you give away some good things and you gain a lot of good things.”
One of those good things might be Prince Abdullah's passion for sport [see box out on page 22]. He previously served as chairman of championship winning Saudi club Al-Hilal and since 2013 has been a 50% owner in Blades Leisure, the holding company for English team Sheffield United. He acquired the stake for £1 ($1.54) with the understanding that he would invest in the club, although both parties declined to publicly disclose how much he was investing. The intention, however, is to take Sheffield United all the way to the Premier League.
Prince Abdullah's IPO of his business echoes the experience of many emerging market entrepreneurs, according to Business Before Wealth, a report produced by Campden Research last year. The research observed that as emerging market businesses mature, professionalisation (including the implementation of world-class best practices in business operations and governance) increases in priority and importance. Businesses that are more than 20-years-old are twice as likely as younger businesses to have a majority of non-family and/or external personnel in key decision-maker roles.
While specific data on Saudi Arabia's family businesses is difficult to come by, they account for an estimated 75% of the Gulf Cooperating Council's (GCC) economy. Sixty per cent have been established since the 1970s. Dubai-based investment firm Al Masah Capital compiled a list of 65 large family businesses in Middle East North Africa (MENA) in 2011. It found the average family net worth in Saudi Arabia stood at $6 billion.
Prince Abdullah has five daughters and two sons, and wants them to consider opportunities beyond the family business. His eldest daughter is 24 and his oldest son is 16-years-old. “I thought it would be easier for my kids in the future. If they don't want to stay in the business it is easier for them to get out.” He says, adding: “I want them to be successful but it doesn't have to be at Saudi Paper. If they have another thing they want to do, it has to suit their skills and their passion.
“I think Saudi Paper and the shareholders deserve that everyone there is committed. If they are not committed, it is better they not be there,” he adds. In a sporting analogy, he points out that the sons of professional footballers are rarely as good as their father's (adding that former Milan player Paolo Maldini was an exception).
Not that a role for the next generation in the business is out of the question. He singles out his fourth daughter as a good candidate and he is slowly introducing her into it. She has yet to go to college and wants to attend UCLA. His son Abdulraham bin Abdullah is yet to start college either, but sits as a director at Sheffield United.
Shortly after our interview, Prince Abdullah was appointed General Presidency for Youth Welfare – a role where he will oversee youth and sport in Saudi Arabia. “Many of us tend to make our kids' lives very easy. I know myself if I knew I would eventually inherit SAR100 million I would not work. As I grew up I saw many of my cousins had money. Their parents were wealthy, they travelled, and they had a good time. They spent a lot of time watching movies, playing cards, travelling around the world. The only reason I worked hard was because it was the only way. I would have enjoyed spending time doing what 22-year-olds and 23-year-olds do.
He also sees a wider issue with the concept of failure in Arab culture. In 2011, an International Labour Organization (ILO) survey on entrepreneurship in the Middle East North Africa region cited non-acceptance from family members, lack of prestige, a high level of competition, and fear of failure as the top four barriers to starting a business. “I think we need to encourage people to find new things and not to be afraid to fail. The only shame is if you fail and you don't get up and try again,” says Prince Abdullah. In a country where the stability and security of government positions is highly prized, it's difficult to make such a cultural adjustment.
Traditionally the kingdom has been a “command regime” and taking initiative is not ingrained in the culture, says Professor David B Audretsch, the Ameritech chair of economic development, at Indiana University in the US, who has advised the Saudi government on entrepreneurship. “It's easier to make the investments in physical capital and infrastructure than it is to change culture,” says Audretsch, who has also served as a visiting professor at King Saud University in Riyadh, Saudi Arabia.
Resource-rich Saudi Arabia has taken strides, however, to build its knowledge-based economy. In 2014 the government launched a global centre for business incubators to support entrepreneurs who come up with technological and scientific business ideas at King Abdul Aziz City for Science and Technology in Riyadh.
Prince Abdullah worries about how his own sons will build any drive when they know they will one day inherit a lot of money. But part of the answer can be found in sports, he says. “Sports can inspire a lot of values, like how to deal with failure. It is not about excuses, but taking responsibility,” he says. On a professional level, sport is the future for him. His dream team is the NFL San Francisco 49ers – a team he would dearly love to own. Of course, he is still focused on building up Sheffield United.
While his royalty could have handed him life on a plate, Prince Abdullah is all too aware how important SPMC has been to shaping him. “I think the more challenges you have, the more chance you have to be successful, because it makes you stronger. It gives you drive. You fall down, stand up and be tough.”
Field of Dreams
Sports-mad, Prince Abdullah is a devotee of Saudi football, the Premier League and American football. “I love sports. If somebody were to bring me an investment to make 20% and a sports investment could maybe break even, I would take sports. I love English football, I love the NFL and of course I love Saudi football also. When the Sheffield United Football Club (SUFC) opportunity presented itself, I found it intriguing [he was earlier offered stakes in Cardiff City and Leeds], the club is interesting.”
At the time his investment was announced in 2013, Sheffield United owner Kevin McCabe described Prince Abdullah's investment as 'game-changing'. CampdenFB contacted the Sheffield United Supporters Club to get their view, but they declined to comment.
The Blades, as they are known, are currently sitting in fifth position in League One, in the third tier of English football, having reached the semi-finals of the FA Cup in 2014. Prince Abdullah stepped down from his chairmanship role in June last year following his appointment, by the late King Abdullah, as president of the General Presidency for Youth Welfare. His son, Abdulraham bin Abdullah remains as a director of Blades Leisure.