Saudi Arabia to boost employment for nationals in wholesale and retail sector

Outlets selling certain grocery items to have 70% local staff from Thursday

Newly-imposed VAT changes stalled consumer spending across the Saudi Arabia economy in August, latest PMI data suggested. Bloomberg

Saudi Arabia will extend its localisaiton programme to employ more Saudi nationals in nine new categories of the wholesale and retail sector from Thursday.

Retail outlets selling coffee, tea, sugar, honey, spices, water and beverages, fruits, vegetables, dates, grains, flowers, books and stationery, tools, toys and detergents, will need 70 per cent of employees to be Saudi nationals. The outlets will have to pay additional tariffs if they fail to meet the target, according to the Saudi Press Agency.

The Saudi Nationalisation Scheme, or Nitaqat, began in the 1980s as a way of ensuring more jobs in the kingdom for citizens. It has been extended both in terms of the targetted percentages and the sectors covered many times since. In the retail sector, many major categories are already covered such as clothing, electronics, furniture, mobile phones and car sales. A range of roles in the hospitality and services sectors also have Saudisation targets.

"Wholesale and retail sectors are key components of trade activity within the country and increasing Saudi nationals in the workforce in the sector is a step towards sustainable economic development for Saudi Arabia," Rabia Yasmeen, a consultant with Euromonitor International said.

However, average salaries for Saudi nationals are higher than non-Saudi workers and "this may impact the costs and expenses for players in the wholesale and retail sector", she added.

In the first quarter of this year, the unemployment rate among Saudi nationals fell to 11.8 per cent, from 12 per cent in the final quarter of 2019 and 12.5 per cent a year earlier. However, the rate of Saudi participation in the workforce also declined slightly to 46.2 per cent, from 46.7 per cent in the previous quarter but higher than the 45 per cent in the corresponding quarter last year, according to the kingdom's General Authority for Statistics.

Saudi Arabia, the Arab world's largest economy, is also stepping up efforts to boost entrepreneurship in the kingdom and help Saudi nationals find jobs in the private sector. Earlier this year, the kingdom said it will grant "instant" work visas to entrepreneurs setting up businesses in the kingdom as part of government efforts to boost non-oil private sector growth.

The initiative "will have an important role in supporting male and female entrepreneurs, incentivising and accelerating business growth, which will open investment opportunities that will contribute to creating sustainable jobs for Saudi men and women", Ahmed Al-Rajhi, Minister of Human Resources and Social Development, wrote on Twitter in March.

Earlier this month, purchasing managers' index data showed Saudi Arabia’s economy is continuing to recover from the Covid-19 induced economic slowdown as business activity picked up following the easing of movement restrictions.

The PMI gauge, which reflects conditions in the non-oil economy, rose to 50 in July from 47.7 in June. A reading above 50 indicates economic expansion and below 50 contraction.