The World Economic Forum article dated 28 May 2019, could well be applied to most of the countries of the MENA region. Apart from the oil exporting ones, all the others’ informal economy appears to the naked eye as undergoing the same phenomenon but perhaps at a lesser density. In effect, very much like in the neighbouring sub-Saharan regions, the MENA’s informal markets seem to be pushing towards a new kind of business structure. A new kind of company is revolutionising Africa’s gig economy?Aubrey Hruby, Senior advisor to Fortune 500 companies replies.
For more than 30 years, governments and international development organizations have followed the same recipe for formalising the world’s informal economy; enacting new legislation and regulations or abolishing those that get in the way of the process.
By 2035, Africa will contribute more people to the workforce each year than the rest of the world combined. By 2050, the continent will be home to 1.25 billion people of working age. In order to absorb these new entrants, Africa needs to create more than 18 million new jobs each year. Given the urgent need to provide jobs and livelihoods to Africans, it is time to examine the conventional wisdom that informal markets must transition into formal markets. Development finance institutions (DFIs) and private investors in African markets can play a critical role in both advancing Africa’s gig economy and changing the narrative that growth in informal markets is incompatible with sustainable development.
Across African markets, companies are pioneering business models that bridge the formal and informal sectors; in these models, each company is a formal entity but can mobilise large numbers of informal actors in their supply chains or service delivery. While this has been done in dairies in Kenya and at coffee and cocoa outgrowers across the continent and in other sectors for nearly a century, the penetration of mobile phones has enabled a new breed of African companies to monetise their ability to organize and inject trust into fragmented informal markets. However, unlike Uber or Airbnb, which disrupted largely formal sectors, many of Africa’s new ‘gig economy’ firms are writing the rules for whole new industries in local markets.
Perhaps the most high-profile example is Safaricom’s M-PESA. Since its launch in 2007, M-PESA, a mobile payments system developed by Kenya’s largest telecoms operator, has enabled millions of informal sector workers to move money at a lower cost, which has provided a significant boost to the Kenyan and Tanzanian economies. Another, more recent example, is Nigeria’s Cars45, operated by Frontier Car Group. Nigeria’s $12 billion used car industry is largely informal and characterised by distrust, a lack of standardisation and the absence of a structured dealer network. Cars45 facilitates the buying and selling of used cars by pricing and rating their condition transparently and conducting online auctions. Many sectors throughout the continent remain highly informal and would benefit from these types of bridges into formality. These ‘bridge companies’ are going to define the future of employment in African countries.
DFIs are ideally placed to invest in bridge companies in African markets, given their long presence and in-depth engagement with local financing environments. The International Finance Corporation (IFC) and the UK’s CDC Group already invest in technology-enabled start-ups, and others, including OPIC, are adapting their strategies to be able to do so. Many of the continent’s most promising technology-enabled bridge companies are starting to raise funding large enough to attract the attention of DFIs. Frontier Car Group recently raised $89 million, Kenya’s Twiga Foods raised $10 million, and Nigeria’s Kobo365 has raised $6 million. Overcoming a dearth of funding remains one of the highest barriers for African entrepreneurs, and the development impact of investing in those that improve employment is enormous.
The gig economy comes with limitations. Lack of legal rights, limited career progression, stagnant pay and a lack of benefits are just some of the issues that will need to be addressed in an ‘Uberised’ world. These challenges, plus the day-to-day economic uncertainty, make the informal sector far worse in many ways than the formal. Bridge companies – because they are registered, and have a public brand and centralised management – can be pressured into addressing issues around workers’ wellbeing. Studies into the financial behaviours and needs of low-income families by BFA, a consulting firm specialising in financial inclusion policies, found that workers often aspired to ‘gig economy’ jobs but hated casual labour (such as waiting on a corner to be hired for the day) because of the lack of reliability and predictability.
The future of work is changing and the mass job creators of today will not be able to meet the needs of tomorrow’s workforce in the same way. Bridge companies are pioneering new ways of injecting efficiency and higher productivity into traditional informal markets. Investing in this trend is critical to solving Africa’s pressing job creation need.
As Chinese President Xi Jinping concluded the latest high-level Belt and Road gathering of world leaders in Beijing last month, China’s signature project has seemingly entered a new phase: worldwide acceptance of the Belt and Road Initiative (BRI) as a fact of international life (like it or not). So, with the wind at its back, is China doubling down on its investments worldwide? Not exactly. The total value of China’s global investments and construction contracts actually fell by $100 billion in 2018, according to data analyzed from the American Enterprise Institute’s China Global Investment Tracker. Just about every region saw a significant decline in Chinese investment or construction projects except, surprisingly, for one: the Middle East and North Africa (MENA).
A flurry of Chinese investment and construction projects in the MENA region over the last three years has made it a key geoeconomic partner for Beijing. But surely, in pure volume terms, the MENA region could not have attracted as much Chinese economic activity as sub-Saharan Africa or East Asia, right? Think again. The MENA region ranked as the second-largest recipient of investment and Chinese construction projects worldwide after Europe in 2018, as the chart below shows.
MENA’s Growing BRI Clout
In 2018, the Middle East and North Africa leapfrogged other emerging markets as a destination for BRI projects.
The MENA region ranked ahead of traditional BRI stalwarts East Asia and sub-Saharan Africa last year, recording $28.11 billion in new projects. The region still lags behind both those regions as a whole since the launch of BRI in 2013 and dating back to 2005, but a three-year surge has brought it in closer proximity to the top of the table. That could mean a windfall for Chinese state-owned construction companies as the majority of MENA projects involve construction, rather than foreign direct investment.
Of the 2018 MENA total, nearly three-quarters was targeted at Egypt, the United Arab Emirates, and Saudi Arabia. Those three countries also make up half of the “$20 billion club”—the group of countries with more than $20 billion worth of projects from China dating back to 2005.
Chinese Investment in MENA Countries
MENA countries with more than $20 billion worth of investment and construction projects by Chinese firms since 2005.
The list here is heavily skewed toward regional oil producers, with the exception of Egypt, and most of China’s projects in the region involve construction rather than investment. Despite a recent setback, Chinese state-owned enterprises will likely play a prominent role in Egypt’s ambitious infrastructure program, including the building of a new, gleaming capital city just outside Cairo. Chinese construction companies were vitalin President Abdel Fattah al-Sisi’s ambitious Suez Canal economic zone project.
At the Belt and Road Forum last month, Chinese enterprises also announced a new $3.4 billion investment to build a trade hub for Chinese goods in Dubai’s Jebel Ali Port, as well as a manufacturing and processing hub for animal and agricultural products for the food industry. China’s dramatic ramp-up of projects in the UAE suggests that it sees the country as an important piece of its Belt and Road logistics network.
Other significant nodes of China’s economic footprint in the region are Israel ($12.19 billion), Kuwait ($10.43 billion), and Qatar ($7.27 billion), according to data analyzed from AEI’s China Global Investment Tracker for the years 2005-2018.
China is pouring a lot of concrete and cement into construction projects in the region but what of Middle East exports to China? How is China affecting the bottom line of key MENA states?
The answer broadly: If you have oil or gas, China is likely to be a major export destination.
Exports to China From MENA Countries
China has emerged as a vital export destination for several countries in the Middle East and North Africa. For these countries below, China made the top five in 2018.
Major oil and gas producers generate significant revenues from Beijing, and China ranks as the top export destination for Saudi Arabia, Iran, Kuwait, and Oman, according to an analysis of data from the International Monetary Fund’s Direction of Trade Statistics.
In some cases, key U.S. allies such as the UAE send nearly three times more exports to China than to the United States, and for Kuwait, Qatar, and Oman, the gap is even starker, with nearly eight times, nearly nine times, and nearly 28 times, respectively, more goods exported to China than to the United States.
For Saudi Arabia, the difference in 2018 was less stark, sending some 30 percent more exports to China than to the United States, according to an analysis of IMF data. Expect this gap to widen as the United States continues to ramp up domestic oil production.
Meanwhile, most North African countries still maintain an export profile heavily dependent on Europe rather than on China, and Israel sends four times more goods to the United States than to China.
You can expect this map to get to darker shades of red over the next decade, particularly as China’s demand for energy—especially natural gas—continues to grow.
Afshin Molavi is a senior fellow at the Foreign Policy Institute of Johns Hopkins School of Advanced International Studies and the editor and founder of the New Silk Road Monitor blog.
Hunger continues to rise in the Near East and North Africa region where over 52 million people are undernourished.
Conflicts and widening rural-urban gaps hamper the region’s efforts to end hunger by 2030.
8 May 2019, Cairo/Rome – Hunger in the Near East and North Africa region (NENA) continues to rise as conflicts and protracted crises have spread and worsened since 2011, threatening the region’s efforts to achieve the 2030 Agenda for Sustainable Development, including Zero Hunger.
Conflict continues to be the main driver of hunger across the region. More than two-thirds of hungry people in NENA, approximately 34 million people, live in conflict-affected countries, compared to 18 million hungry people in countries that are not impacted directly by conflict.
Stunting, wasting, and undernutrition are also far worse in conflict countries than in the other countries.
“Conflicts and civil instability have long-lasting impacts on the food and nutrition security of both affected and surrounding countries in the regions” said Abdessalam Ould Ahmed, FAO Assistant Director-General and Regional Representative for the Near East and North Africa.
“The impact of the conflict has been disrupting food and livestock production in some countries and consequently affecting the availability of food across the region,” he added.
“Rising hunger is also compounded by rapid population growth, scarce and fragile natural resources, the growing threat of climate change, increasing unemployment rates, and diminished rural infrastructure and services” Ould Ahmed underscored. The report highlights that the region is not facing just a hunger crisis as some of the highest rates of obesity are also found in countries within the region, putting pressure on people’s health, lifestyles and national health systems and economies. Addressing obesity requires food systems that ensure that people have access to healthy nutritious food and also increased public awareness and information on the risks associated with overweight and obesity.
Inadequate rural transformation hampers efforts to eradicate hunger and malnutrition by 2030
The report shows that not only do conflicts undermine the region’s Zero Hunger efforts, but also the degree of rural transformation.
“Countries that are not in conflict and have gone furthest in transforming rural areas in a sustainable way including through better management of water resources, have achieved better food security and nutrition outcomes than those in conflict or with lower levels of rural transformation,” Ould Ahmed said, noting how the report stresses that more efforts are needed to boost rural employment, stimulate economic growth in rural areas, reduce urban-rural gaps, and improve agricultural productivity and rural infrastructure and services.
The report highlights how unemployment, particularly for young people and women across all age groups is a significant challenge in the NENA region and is often higher than in other regions of the world. This is aggravated by rural-urban gaps – with significant disparities in living standards and poverty rates between rural and urban areas – and differences in labour productivity between traditional agriculture and industry and services. This gap is deepened by differences in access to education, health as well as other public services and housing.
At the same time, rural areas accommodate around 40 percent of the population, where the majority of poor are living. The report shows that the average wages for those employed in agriculture are likely to be far below those of workers outside the sector. Partially as a result of lower wages in agriculture, rural areas in the NENA region generally have higher income poverty rates than urban areas. On average, rural poverty is about twice as high as poverty in urban areas.
Transforming agriculture to achieve Zero Hunger
At a regional level, there are significant opportunities for transforming agriculture in a sustainable way, starting with the provision of improved access to markets for farmers, promoting investments in agriculture, transfer of technology and other innovations, more efficient and effective management of water resources, as well as key policy changes that support the shift from subsistence farming to commercial and diversified production systems.
“There is a great need to encourage our region’s farmers to produce according to the comparative advantage of the region,” Ould Ahmed said, highlighting that the NENA region has a great potential in the production of crops and livestock products that are least intensive in arable land and water and more intensive in use of labour.
The report highlights that greater efforts and actions are needed to support the development and implementation of policies and programmes to abolish rural-urban differences.
Key facts and figures
Number of hungry people in the Near East and North Africa: 52 million, 33.9 million are in conflict countries directly and 18.1 million in non-conflict countries.
Children under five affected by stunting (low height-for-age): 21.1 percent.
Children under five affected by wasting (low weight-for-height): 8.7 percent.
Children under five who are overweight (high weight-for-height): 9.1 percent
Note to editors: NENA countries include Algeria, Bahrain, Egypt, Iran (Islamic Republic of), Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, the Syrian Arab Republic, Tunisia, the United Arab Emirates and Yemen.
Growth in Saudi Arabia’s economy will slow slightly this year, creating a challenge in terms of generating enough jobs for its citizens, an economist has told Zawya.
A new Economic Insight: Middle East Q1 2019 report published by accountancy body ICAEW (Institute of Chartered Accountants in England and Wales) and Oxford Economics said that it expects economic growth in the Kingdom to slow marginally in 2019 to 2 percent, down from 2.2 percent in 2019 as oil revenue falls due to Organization of the Petroleum Exporting Countries-mandated production cuts and “only a modest acceleration in non-oil activity” due to the challenging business environment.
The report said that although it expects growth in Saudi Arabia’s non-oil sector to grow by 2.6 percent this year, supported both by an expansionary fiscal policy and reforms aimed at boosting the private sector, hiring activity remains “subdued”.
Mohamed Bardastani, ICAEW economic advisor and Middle East senior economist at Oxford Economics, told Zawya in a telephone interview that the jobs market in Saudi Arabia has been “extremely challenging, and we don’t see it changing any time this year”.
He explained that that in the two years between the end of 2016 and the end of last year, the country’s Labour Force Survey showed that more than 1.5 million jobs were lost among expats – a result of “the economic slowdown, various fiscal consolidation measures, but most importantly the measures that the government took in terms of applying expat levies and expat dependent fees on private sector companies”, Bardastani said.
“The private sector, historically speaking, has been relying on expat workers. Around 80 percent of the private sector is made up of expat workers. So obviously, this will have ramifications on growth,” he said.
Moreover, unemployment among Saudi nationals remains stubbornly high at 12.7 percent, considerably above the 7 percent target set under the kingdom’s Vision 2030 goals.
“Historically speaking, the public sector most of the time absorbed the new job entrants. This is one of the main challenges in Saudi right now. I think it is the most pressing challenge, where you have around a 12-7-12.8 (percent) unemployment rate and you have around 400,000 graduates (each year), and then job creation is relatively weak,” he said.
Bardastani said that the government faces a difficult choice, “between either absorbing those new job market entrants and increasing its spending, which will lead to higher budget deficits” or continuing to push through reforms in the expectation that they create enough opportunities for private sector companies to generate jobs.
“I think, for sure, that’s going to take some time,” he said.
The survey also stated that it expects faster non-oil growth in the United Arab Emirates, but again a limited increase in employment opportunities.
Growth in the non-oil economy is set to increase to 2.1 percent this year, up from 1.3 percent in 2018, on the back of expansionary budgets and “pro-growth government initiatives”, such as the 50 billion dirham ($13.6 billion) ‘Ghadan 21’ initiative in Abu Dhabi, but job creation has slowed in key sectors, including services and manufacturing.
Bardastani said firms that have seen input costs rising have been unable to increase selling prices due to competitive pressures.
“So you have this squeeze in profitability margins. Many firms are becoming more efficient in terms of producing the output – they have to do more with less resources. That’s why job creation has been weak.”
A jobs survey also published on Wednesday by recruitment firm Michael Page was more upbeat on the prospects for Saudi jobseekers, stating that 64 percent of respondents were positive about the current job market in the kingdom. It also said 86 percent of respondents said that they expect the jobs market in Saudi Arabia to improve over the next six months.
In a press release announcing the survey results, Michael Page Saudi Arabia’s operating director, Domenic Falzarano, said: “Given the kingdom’s commitment to its Vision 2030, the bulk of the hiring is taking place in the financial services, infrastructure, entertainment, tourism and healthcare sectors.”
(Reporting by Michael Fahy; Editing by Mily Chakrabarty)
EY research says the largest event to be held in the Arab World is predicted to add the equivalent of 1.5% to UAE GDP
Expo 2020 Dubai will boost the UAE economy by AED122.6 billion ($33.4 billion) and support 905,200 job-years between 2013 and 2031, according to an independent report published by global consultancy EY.
During the peak six-month period of the World Expo, the largest event to be held in the Arab World is predicted to add the equivalent of 1.5 percent to UAE gross domestic product.
The scale of investment pouring in to construct and host an event of this ambition, as well as goods and services consumed by the millions expected to visit and the businesses that will occupy the Expo site in the legacy phase, will result in an economic dividend that will benefit businesses large and small across a range of sectors for years to come, according to the report.
From November 2013 – when Dubai won the bid to host the Expo – until its opening in October 2020, the economic impetus will be driven by the construction sector as work continues on building the site and supporting infrastructure such as roads, bridges and the Dubai Metro Route 2020 line, EY noted.
Najeeb Mohammed Al-Ali, executive director of the Dubai Expo 2020 Bureau, said: “This independent report demonstrates that Expo 2020 Dubai is a critical long-term investment in the future of the UAE, which will contribute more than 120 billion dirhams to the economy between 2013 and 2031.
“Not only will the event encourage millions around the world to visit the UAE in 2020, it will also stimulate travel and tourism and support economic diversification for years after the Expo, leaving a sustainable economic legacy that will help to ensure the UAE remains a leading destination for business, leisure and investment.”
The report added that small and medium enterprises, a core component of the UAE economy, will receive AED4.7 billion in investment during the pre-Expo phase, supporting 12,600 job-years.
Job-years is defined as full-time employment for one person for one year and describes the employment impact over the life or phase of a project.
During the peak six months of Expo 2020, visitor spending on tickets, merchandise, food and beverage, hotels, flights and local transport will propel economic activity.
Expo 2020 expects 25 million visits, with 70 per cent of visitors coming from outside the UAE, providing the hospitality industry with an unmissable opportunity to show the world what the UAE has to offer.
The EY report added that the positive thrust will continue in the decade after Expo closes its doors in April 2021, thanks largely to the transformation of the site into District 2020, an integrated urban development that will house the Dubai Exhibition Centre.
Matthew Benson, partner, Transaction Advisory Services, MENA, EY, said: “Expo 2020 is an exciting long-term investment for the UAE, and is expected to have a significant impact on the economy and how jobs are created directly and indirectly.
“As the host, Dubai aims to use the event to further enhance its international profile and reputation. The event will celebrate innovation, promote progress and foster cooperation, and entertain and educate global audiences.
As per the World Bank in its latest announcement, “Growth has picked up across the region and is projected to strengthen over the next few years. And almost all MENA countries have moved to reduce or eliminate energy subsidies, identify new sources of non-oil revenues, and expand social safety nets to shield the poor from adverse effects of change.”
Meanwhile the World Economic Forum informs that the MENA region hosts the world’s elite today and tomorrow by the Dead Sea shore, to try and debate some of the region’s current issues. Jordan has already held the WEF’S gathering in the recent past; refer to MENA-Forum.
ByMirek Dusek, Deputy Head of the Centre for Geopolitical and Regional Affairs, Member of the Executive Committee, World Economic Forum
For thousands of years, the Dead Sea has attracted visitors from far and wide, drawn by legends of its power to heal and rejuvenate. On 6-7 April, 1,000 key leaders from government, business and civil society will gather on its shores for the World Economic Forum on the Middle East and North Africa (MENA). Over two days they will confront the issues facing more than 400 million people.
A region of two opposing systems
The Arab world is a region of two contrasting systems. One system features a dynamic private sector, digitally native youth and open economies. The other has a bloated public sector and closed, controlled economies.
Most people in the Middle East and North Africa (MENA) interact with both systems, facing a mixed reality. Wealth sits side-by-side with poverty; an exciting entrepreneurial culture struggles with leaden bureaucracy; and an insatiable appetite for the new is balanced with a reverence for tradition.
How these two systems interact – and whether the dynamic, forward-looking system can thrive while respecting the traditions of the Arab world – is among the most important issues the region is facing today.
Five key questions
The following five areas will determine whether the Arab world can successfully move towards the system of innovation and competitiveness.
1. Can the Arab world develop a new, sustainable economic and social framework?
The social contract in much of the Arab world has relied on state-provided employment. This is unsustainable. Nearly half the population is under 25, and a quarter of those are unemployed. Add the biggest gender gap in the world, and it’s clear a new framework is needed.
2. Can a mechanism for conflict resolution be developed?
Ongoing humanitarian disasters in Syria, Yemen and Iraq require immediate attention, as do the longer-term projects of rebuilding fully functioning states. The region has been home to long-standing tensions, and unless these are mitigated, a thriving, competitive region will be hard to realise.
3. Can an ecosystem of entrepreneurship and innovation be developed?
The stories of individual success in the region are too often ones of thriving despite the economic framework. An ecosystem that nurtures innovation and encourages firms to flourish and grow is needed.
4. Are countries prepared for the Fourth Industrial Revolution?
Changes in the way we work are happening more quickly than most societies are prepared for. There is a short window for establishing the right regulatory environment, and reskilling people to make sure they – and the larger economies – can capture the opportunities of technology.
5. Will addressing corruption and transparency be a priority?
Governance reform is a “must do” issue in the region and disillusionment caused by perceptions of corruption is particularly strong among young Arabs.
Global questions, Arab answers
While other regions have grappled with similar questions, the Arab world needs Arab solutions, that capitalize on the unique strengths of the area while accounting for its important sensibilities. There are good examples of this starting to happen.
The UAE is playing a leading role in integrating the region into the global economy. The new Emirates Centre for the Fourth Industrial Revolution, run by the Dubai Future Foundation in partnership with the World Economic Forum, is working to shape governance and capacity issues in the MENA, and it could shape data protocols across the world as a whole. Europe is enforcing strict data protections and regulations, while the United States is taking a more liberal approach. The Arab solution being developed may not just be a better fit for the region, but for elsewhere as well.
Saudi Arabia already has an influential voice as part of the G20, and it’s a voice that can grow. In 2020, it will host the Riyadh Summit, presenting an opportunity for greater impact on the regional and global agenda. A forward-looking programme that strengthens the MENA economies and the global economy as a whole will be an important step toward long-term success for the area.
Actions not words
There is a dire need for a new collaborative platform that brings governments together with businesses and other stakeholders in private-public cooperation. This is the aim of the World Economic Forum’s summit in Jordan. By convening members of the public and private sectors, and bringing new voices into the arena, such as the 100 Arab Start-ups, we hope to facilitate forward-leaning dialogue that understands and respects the values and culture of the region.