How do Positive Impact Partnerships create jobs in the MENA region?
The MENA region faces a rapidly growing youth population. Positive Impact Partnerships bring together players from different industries to address market failures and co-create a sustainable ecosystem.
One of the most critical issues facing the MENA region (Middle East and North Africa, a group of 21 countries) now is the creation of jobs to accommodate its rapidly growing population. Growing at 2 percent, compared to 1.2 percent globally, there is what is often called a ‘youth bulge’ with nearly 95 million people aged between 15 and 24 years. This trend seems likely to continue in the coming years. Countries like Iraq, Yemen and the Palestinian Territories are experiencing high fertility rates and rapid youth population growth, with some well over 40 percent.
The ramifications on the labour market are clear. According to the World Bank, an estimated 43 million young people are entering the MENA’s labour force in the coming years. Combine this with worsening macroeconomic conditions, and governments are unlikely to be able to absorb the growth in job seekers. Increasingly, the pressure is on the private sector to take up the slack.
In Saudi Arabia, the numbers are startling. With an astounding 55 percent of the total Saudi population under the age of 24, 31.2 percent of young people aged between 15 and 24 are unemployed. This is 25 percent higher than the MENA average, and three times the OECD average. In fact, Saudi youth make up 90 percent of all unemployed Saudi citizens in the Kingdom. This is a critical issue that looks likely to only get worse in the years to come, with 29 percent of the total Saudi population under the age of 15. Additionally, KSA has a youth growth rate of 2.62 percent, outstripping the MENA average of 1.7% and more than double the global rate of 1.1%.
In Saudi Arabia, the government has made it clear that it can’t and won’t absorb this glut. Vision 2030 sees increased pressure on the private sector to fill the void with the target of 50 percent of all Saudis employed in the private sector by 2020. This is compared to 33 percent today, or an additional 17 percent.
The private sector is reluctant to take on this responsibility. According to Palladium research, 44 percent of business leaders do not see it as a priority for their company to find appropriately qualified Saudi youth to fill vacancies. Further to this, they have little faith in the education system that is feeding them job seekers with only 34 percent believing that the education system prepares youth appropriately for the job market. To top it off, the private sector companies are under intense pressure from macroeconomic factors. In 2016, non-oil private sector growth rate was only 0.2 percent, the lowest in 25 years, and the trade hotels and restaurant sector, seen as a reliable proxy for consumer spending, was down 0.8 percent.
According to the World Economic Forum, solutions to date show little progress in confronting the challenge of youth unemployment in a structural manner, in spite of existing financial means. The outlook seems grim in transforming the Saudi economy to effectively manage, among other things, the glut of young people entering the workforce over the coming years.
All of this poses the question, how can this be resolved?
The need for an innovative approach is clear. The old ways will not do. Increasingly recognised internationally as a successful tool to address these kind of complex societal issues, Positive Impact Partnerships (PIP) provide a systemic solution for market failures that create enduring and measurable economic and social value. Through bringing together multiple actors within a given industry to develop and ecosystem of suppliers, customers and service providers; creating long-term partnerships; jobs; and a differentiated competitive advantage; real and enduring change can be achieved.
According to Clare Woodcraft, Chairperson of the Arab Foundation Forum and CEO of Emirates Foundation, “The Middle East has been trying to tackle the challenge of job creation for over 20 or 30 years now and for at least over 10 years, the importance of job creation has been highlighted by various international development agencies including and most notably the UNDP in their Arab Human Development Report where it has been very high on the radar screen. Yet, here we are 20 years later and we haven’t seen a huge growth in either job creation at scale or in promoting entrepreneurs to create jobs.”
By leveraging the renewed interest, Saudi Arabia can use PIPs the create value various strategic industries, as identified for significant focus and investment in Vision 2030. Bringing together players from across these industrial value chains, multiple partners can join forces to collaboratively finance and address challenges that are too large for any one of them to do alone. The effective development of PIPs has the capability to create hundreds of thousands of jobs for Saudi youth over the coming years.
PIPs incorporate five key elements to be the catalyst for greater impact and value creation for multiple actors across any given system.
To create PIPs to address job creation, multiple players across Saudi Arabia, companies, local municipalities, the community, education providers both public and private, and the third sector (NGOs), need to come together to agree on the vision and the plan to execute a Positive Impact Partnership strategy successfully. These players can then work together to co-create new ecosystems. A catalyst or backbone organization needs to be assigned to help set ground rules and develop shared measurement system to ensure impact, in this case jobs for young Saudis, is closely monitored and measured. Through creating consensus and commitment, as well as accountability and a governance structure for the strategy, success is realised.
The success of this approach has been shown around the world. In the MENA region, Palladium is working with governments, the private sector, NGOs and the community to leverage this model, making a real and sustainable difference in job creation. PIPs, designed to drive large-scale social change, are distinct from traditional partnerships models. They address five key needs at the intersection of governments, markets and civil society, specifically the need for:
- Delivering structure that can tackle complex societal challenges requiring change at the multi-actor and systems levels;
- Aligning the private sector’s commercial and social impact aspirations with public sector development programs, driving competition and growing productive human capital;
- Innovative investment vehicles around social issues and an alternative asset class not correlated with traditional markets;
- Mechanisms that can drive enduring change beyond political-economic cycles; and
- Clear measurement systems where all actors can see a clear return on investment.
In Jordan, PIPs are already making a difference in addressing job creation. The Arab Foundations Forum (AFF), a not-for-profit membership-based youth coalition of philanthropic foundations in the Arab region, aims to foster dialogue and collaboration opportunities amongst the network in order to bolster the capacity and efficacy of strategic philanthropy. Focusing first on reducing youth unemployment in Jordan, it is a model that can be rolled out across the region. According to Clare Woodcraft, “We at the AFF realize that despite acknowledgment of the problem, there were some fundamental flaws in the enterprise ecosystem that were preventing job creation at scale and then based on research we identified five key ingredients to job creation and to building an enterprise ecosystem (which are the five key pillars). What we discovered across the Middle East is that most countries have individual institutions working on one or maybe two of those ingredients/inputs but there are very few countries, if any, that are working on all five of those key inputs in collaboration such that you have a cohesive enterprise ecosystem such that you could actually create real scalable jobs.”
Each of AFF’s 20 participating organisations bring unique and complementary capabilities for enabling and achieving large-scale social change through:
- Government of Jordan – priorities, policies and programs
- Private sector – core business opportunities, shared value interventions and CSR priorities,
- Communities participation – action of civil societies, NGOs and associations,
- Philanthropists, aid agencies and impact investors – facilitation of grants and funding mechanisms for increased impact
The AFF Youth Coalition is built around the model developed by Shell Foundation study around job creation in the MENA region. It has 5 key pillars:
- Talent – Equipping youth earlier with the right skills for the local labour market and ‘work ready’ through effective career counseling and monitoring to minimize attrition and maximize work placement;
- Flexible Patient Capital – Ensuring debt and equity financing on appropriate terms (capital requirement, pricing and tenor) structured to fit the specific needs of small to medium size enterprises (SMEs) – the greatest potential job creators;
- Business Development Assistance – Providing customized, robust and sustained business training and solutions, including market information, marketing, management and finance, strategic planning and technology to bolster the business skills and knowledge of local entrepreneurs;
- Market Linkages – Linking SMEs to supply chains and to the vast potential business and community development opportunities and investment projects that will ensure the growth and sustainability of SMEs;
- Enabling Business Environment – Removing regulatory barriers that are harder for small and mid-sized enterprises to overcome than for large enterprises.
Across the AFF, there are over 70 existing programs around job creation, ranging from training university students, creating job opportunities and providing loans and investments to supporting entrepreneurs.
So far, key results include:
- More than 1,000 university students trained from all across Jordan every year
- More than 9,000 youth trained in “entrepreneurship” skills, providing key tools to help them succeed in their own businesses
- JD 54 million worth of loans disbursed
- 362 start-ups supported
- 3000 plus scholarships provided to help educate youth
- 80 percent of youth enrolled have found employment between three and six months after graduation as compared to the average timeframe of youth who don't go directly from education into a job of 32.8 months
By providing both the business skills support and type of risk capital appropriate to the needs of start-up and growing businesses, Shell Foundation has been able to deliver this integrated solution to generate both acceptable financial returns to investors as well as development outcomes at scale. Shell Foundation has engaged partners from the private, public and NGO sectors to create significant social change across the region. Specifically, they have worked hard on three of the key features of PIPs; aligning the strategies of the players; building alliances across the value chain; and insulating investment from political and economic influences through the development of the fund itself.
PIPs provide the MENA region with the opportunity to transform an inefficient, dysfunctional local equilibrium into a new sustainable ecosystem and harness the vast human resource that exists within the region.
According to Mr. Ahmad Alhendawi, the first-ever United Nations Envoy on Youth, “We cannot really achieve the Sustainable Development Goals (SDGs) or bring peace and prosperity to our world without engaging young people.”
In an earlier interview with Palladium, Mr. Alhendawi insisted, “Fully engaging youth in the labour market is key to addressing most of the issues we are facing today. If we bring the community together to create meaningful jobs we can make significant progress in driving socioeconomic progress in all areas of society. Research has clearly shown that youth engagement improves socioeconomic indicators, productivity, social stability and drives sustainable growth and development. Engaging individuals and organisations across society towards this goal is one of the most important things that we can do to build a sustainable future.”
By working with investors, donors, and multiple actors to provide blended finance to de-risk ventures, and by recruiting a catalyst to build linkages and relationships in the ecosystem to establish the ground rules, real social and economic change and progress can be made. Through a robust measurement, monitoring and governance system, sustained progress can be achieved.
The MENA region has the urgent need to meaningfully engage the vast resources it holds in its youth, and leveraging their intelligence, enthusiasm and ambition to become the leaders of the future. For Saudi Arabia in particular, PIPs provide a significant opportunity to address this urgent issue. By creating a PIP with the private sector, third sectors and the government for youth job creation, based around the venture philanthropy/social enterprise model, it will be able to achieve seven key elements to improving youth employment:
- Effectively connect youth with businesses through a sustainable mentorship approach;
- Build volunteering programs designed to develop the work ready skills that are in demand by employers in Saudi youth;
- Encourage students to select careers in areas of labour market need such as STEM through career guidance and awareness;
- Creating an appetite among Saudi youth to enter the private sector;
- Support skills development in strategic sectors;
- Build effective links between the labour market and the education system, making it more relevant for both students and the business community, and encouraging Saudi youth to stay longer in the education system;
- Drive economic growth by supporting business growth.