Icarus: The Life and Death of the Abraaj Group has at is core a very interesting message quite separate from the central story of the Abraaj Group: the firm’s loss is a blow to the worthwhile cause of impact investment itself. When the author talks of the human cost of the games of national power that burnt down the towers of Abraaj, quite apart from the psychological and physical pressures on the figure of Arif Naqvi, founder and CEO, at the centre of the book, it is an underlying current that alongside that comes a loss of the good work that Abraaj did. ‘Making money and doing good’ is something of a mantra of the protagonists, founder and firm alike, an ethos that they evangelised and promoted. What Icarus shows is that Abraaj did both of those things, and we are worse off that it was sacrificed and taken down. The concept of impact investing is one easy to be cynical about, to see as just a money-making ploy wrapped in the cosy language of social and environmental justice, but Icarus demonstrated that Abraaj were, at least for a while, genuinely showing a new way forward. This matters for business because this was no, as some would have it, a capitalist myth perpetuated by a con man. This was a good firm, doing good work, for good returns in interesting places.
As the author concludes: “The performance of Abraaj as a private equity company in terms of the difference it made in deal-level abnormal performance is stark in comparison with its peers because profit and loss is not the only way in which a company should be read. In addition to the profit and loss metric, we need to understand the social, economic and political context in which the company was formed, developed and rapidly grew. The team who ran the company and the decisions they made are, obviously, critical in assessing the success of the company, but so too is the context in which it operated. This was not a private equity or venture capital firm making investments in high-tech start-ups in Silicon Valley. This was a private equity firm based in Dubai with an investor base of family offices of high-net-worth individuals and families, which gradually expanded that base to include more institutionalised investors making investments in emerging markets. It did not do these things in a vacuum. And it certainly was not alone in its thinking that it should do so – as it was encouraged by world-class advisers, service providers, investors and governments around the world to grow.”
In the geopolitical realm, Icarus convinces of the utility of impact investment as an alternative to the floods of investment, coming as a they do with long, long strings, that make up the Chinese exercise in soft power called the Belt and Road Initiative. It is well aware of the vampiric reputation of much of private equity, the ‘greed is good’ mentality that has made such a reputation deserved, of layoff and shuttered family stores. Even of the wording of why the Abraaj Group was different is somewhat circular and tangled, Icarus makes it clear enough that why Abraaj cannot be tarred with the same brush lies in their acceptance of a move away from cold hard profit as the only measure of success. The book also highlights the importance Abraaj placed on building up their operations through the markets they operated in, tailoring deals to local contexts and laws, recruiting people who knew intimately where they would be working. The firm seems to have done everything in its power to avoid replicating the cut and sell historical private equity model on an international scale, and the case studies included such as that of Tunisia’s Opalia Pharma show that at its best a deft handling of local contexts resulted in success for everyone. There were also some failures but out of 200 or so firms invested in 5-7 flops is a good hit rate and a balanced view of the firm would say that it did well especially at making a difference to the way the firms were run. Icarus has a postscript that explores all this in detail. It is not just for the specialist it proves the firm was not “an organised criminal conspiracy” as Mr Murdoch’s journalists at the Wall Street Journal has maintained in support of the US DOJ. In fact this Pakistani lead company was a good company that did good here and in many other countries.
No more was this exemplified than in Karachi Electric, but here too came the fatal flaw which undid them. Icarus is able to focus at once on the micro- and the macro-levels, something which as soon as the Abraaj Group could not destroyed them. The book digs into how exactly they turned Karachi Electric around, its potted history of military control, standoffs with unions and battling a jobs for life mentality. It never loses sight of the fact that losing power in Karachi meant more than a drop on the balance sheet, or a juggling of resources, but something with the potential for human misery and even possible spiralling violence. By never losing sight of that fact, the fact that Abraaj turned it around, got power flowing regularly across the city and improved its infrastructure to boot, it is convincingly not just as a financial success story but a human one too. Arif Naqvi was born in Karachi, he knew how vital the power company was to the peace and health, human and political, of the city. As a case study, quite apart from the macro-level role it plays as the catalyst for Abraaj’s destruction, the examination of how Abraaj succeeded with KE and why it matters shows the solid foundations that the ideology, if you will, of impact investing.
Why then was Abraaj taken down? Icarus concludes that it was because the proposed sale of KE to a Chinese state-owned power company, the state’s in practice if not in law, was too big a concession for American interests in Pakistan to allow. It argues that it was not all one sided, that Naqvi made tactical errors, that he may even have panicked under pressure from actors whose advice concealed that they did not have his or his firm’s best interests at heart. From an impact investing perspective, what undid the firm was treating a geopolitical asset such as Karachi Electric just like any other business deal in the tradition they had always acted in Pakistan -what is the best interests of the company and the country. One mistake was enough, when playing on such a global level, and Icarus makes clear is that Abraaj’s steadfast commitment to their principles led them to be vulnerable to naked power politics. Karachi Electric has still to be sold, goes the refrain throughout the book, and Icarus succeeds in its storytelling so that the reader understands what that means, and what has been lost, and all who live in Karachi know how badly the $9billion in promised Chinese investments are needed.
ICARCUS: The life and times of the Abraaj Group Brian Brivati, Published by Biteback on 20th July
https://www.amazon.co.uk/Icarus-Life-Death-Abraaj-Group/dp/1785907182/ref=sr_1_1?dchild=1&keywords=brivati&qid=1624516576&sr=8-1
What a total load of baloney Mian Abrar. If you call yourself a journalist, then you need to go back to journalism school. Whilst some good has come out of Abraaj – this became a Ponzi scheme with Naqvi siphoning off hundreds of millions of dollars that remain unaccounted for – stop painting him as a hero brought down by the west in BCCI style, he was a fraud.