Are Startups Really Creating More Jobs In The Arab World ?
By Leena Eldeeb / Startup Scene
Will innovative companies be able to solve an ageing crisis such as unemployment? Leena ElDeeb speaks to business people and economists enthusiastic about entrepreneurship in the region to find out.
On Labour Day, there couldn't be a better opportunity to ask this question: can infant companies be able to solve an ageing crisis such as unemployment? According to the World Bank, unemployment rates across the MENA region are higher than any other region in the world. There are 21 percent unemployed in the Middle East, and 25 percent in North Africa; nearly 30 percent of which are university graduates.
These figures have triggered companies like Souq.com to position themselves as social saviours on a mission to rescue Arab youth from the pit of unemployment. "We owe it to us to stay in the region and continue to create jobs," said Souq.com's CEO Ronaldo Mouchawar, shortly after his company got acquired by e-commerce tycoon Amazon. "Part of Amazon entering and acquiring Souq was to grow the ecosystem to create more jobs. We have already hired tons of people in many of our markets."
On the governmental side, Egyptian President Abdel Fattah al-Sisi has pledged to reduce unemployment to 10 percent over the coming few years. Last August, the unemployment rate in Egypt fell under 12 percent for the first time since the uprising in 2011. But are startup behind this decline? In an effort to analyse the decline of unemployment rates in connection to the emergence of startup ecosystems across the region, we explore three different job markets; Jordan, with an unemployment rate of 18.5 percent, Egypt, with an unemployment rate of 11.8 percent, and UAE, with an unemployment rate of 3.69 percent.
One main reason behind the region's staggering unemployment rates lies in the skillset gap between what candidates are taught and what the market needs. "Kids are taught one thing at school and university, but then they need to relearn new skills once they hit the job market," says Dina El Mofty, CEO of Injaz Egypt, which is part of larger-scale, regional non-profit organisation Injaz, which empowers young people to own their economic success. "There is a mismatch that exists which has created a gap between the education system and the working world, and this needs to be immediately addressed," she adds.
While agreeing to El Mofty's rationale, Anthony Hobeika, CEO of MENA Research Partners, a research and consultancy outsourcing company offering customised business intelligence and analytics to corporations in the MENA region, finds that other reasons include lack of sustainable economic growth. "This delivers inefficient small firms with low productivity and low investment requirements, which tend to hire low skilled workers," he tells Startup Scene ME.