Saudi SMEs come to fore as Kingdom pushes for economic diversification

RIYADH: Saudi Arabia’s small and medium enterprises sector continues to witness a growth trajectory in the first half of 2022, as the Kingdom pushes ahead with fostering entrepreneurship and stimulating investment in startups and small businesses as part of Vision 2030.

The number of registered SMEs in Saudi Arabia hit 892,063 at the close of June, registering a 25.6 percent increase from the fourth quarter of 2021, according to the General Authority for Small and Medium Enterprises.

Riyadh and Makkah were the most attractive regions for startups, accounting for 35.4 percent and 21 percent of the Kingdom’s SMEs respectively, according to Monsha’at quarterly report titled SME Monitor.

The Eastern province was placed third with 12.7 percent of the total SMEs in Saudi Arabia.

Micro-sized firms lead SMEs sector

Micro-sized firms made up 81 percent of the registered SMEs in the Kingdom, each generating revenue of up to SR3 million ($800,000) a year and employing up to five members of staff, according to the report.

It further noted that Saudi Arabia’s private sector employs a total of 9,065,648 people, with 43.4 percent of them employed in Riyadh, followed by 19.7 percent and 19.9 percent in Makkah and Eastern provinces respectively.

F&B sector

SMEs operating in the food and beverages sector continued to attract the interest of investors, as these firms received more funding than any others in the first half of 2022.

F&B SMEs secured investments worth SR702 million in the first half, according to MAGNiTT’s Saudi Arabia Venture Capital Report.

Saudi startup FOODICS, which offers restaurant management software, digital payments, and micro-loans, led the growth of the F&B sector as it raised SR638 million in April 2022.

“In the past quarter alone, we have seen new German, Greek, Italian, French, American, British, and Emirati restaurants, cafés, concepts, and chains open across Saudi Arabia,” said Bandr bin Abdullah Alobied, Monsha’at’s deputy governor for strategy. 

He added: “Saudis themselves are proud of their own traditions, and keener than ever to support domestic concepts. Local entrepreneurs who have entered the F&B space have found a receptive clientele that is eager to support homegrown chains.”

Female entrepreneurship

The report also revealed that Saudi Arabia has successfully narrowed the gender gap in the Kingdom, as 45 percent of SMEs are now headed by women.

The regulatory reforms over the first half of 2022 have played a crucial role in increasing the number of female entrepreneurs in the country. Most of these women are leading firms in the food, wholesale and retail, health, and professional sectors and supporting service industries.

“Vision 2030’s ambitious targets for female labor force participation have already been met far in advance of the Kingdom’s original targets. As thousands of smart, creative, and highly motivated new women enter the workplace each year, female-led SMEs will continue to transform the wider economy,” added Alobied.

Saudi Arabia’s total female workforce participation rose to 33.6 percent in the first quarter of 2022 from 20.5 percent in the same period in 2019, when most countries globally saw a decline in female participation.

In the report, Monsha’at added that the female unemployment rate in the Kingdom fell to 21.2 percent in the first quarter of this year, while it was 31.7 percent during the same period in 2019.

SME ecosystem

Alobied pointed out that the SME ecosystem is on a path of transition, as the Kingdom’s startups and entrepreneurs emerged as the second-best funded in the Middle East and North African region during the year’s first six months.

“The country as a whole is embracing the private sector in ways they never have before. On the one hand, this is because we enjoy one of the world’s most business-friendly and progressive governments. On the other hand, we are benefitting from a tremendous demographic advantage,” he said.

Alobied further noted: “Saudi Arabia’s population is young, educated, prosperous, and growing. When I see how innovative, technology-driven and resourceful our people are, I have no doubt the country will continue to confound observers everywhere for the better.”