“Company leaders of middle-market companies in Saudi Arabia are riding a wave of ambition and confidence, as set out by Vision 2030 and the National Transformation Program. Contrary to the common belief that regulation stifles growth and innovation, Saudi executives believe that reforms set by the Crown Prince have been driving change and growth in the Kingdom. The decision of MSCI to add Saudi Arabia to its Emerging Markets Index is a testament to the progress being made in the Kingdom and the positive effects of the reforms.”
“The ambitious growth expectations of Saudi middle market companies cited in the EY Growth Barometer far outstrip the International Monetary Fund’s 2018 GDP growth forecast of 1.7%. This is very encouraging for Saudi businesses - one of the key goals of Vision 2030 was to increase participation from middle-market businesses in the economy, and this has clearly boosted confidence,” continues Fahad.
While executives remain confident in growth, they are concerned about cash flow shortages, citing insufficient cash flow as the number one challenge to growth this year. Approximately a third (34%) of Saudi companies surveyed currently rely on bank finance for funding, but as Saudi Arabia looks to upgrade its stock exchange and open it to foreign investors, are looking for funding through capital markets. Almost three-quarters (73%) of executives are considering an IPO – another sign of burgeoning business confidence.
Abdulrahman Moulay Albizioui, Saudi Arabia Transaction Advisory Services Leader, EY, says:
“Cash flow is one of the highest risks for companies on a growth journey. With growth comes the need for working capital, and in line with fast-growth companies worldwide, the gap between long-term financing and short-term needs is a constant challenge. Growth strategies such as technology investment, entry into new sectors and sub–sectors, and new markets, all put a strain on working capital. Lack of cash in the balance sheet is a significant challenge to growth not just in Saudi Arabia, but across the world.”
Embracing the adoption of AI
Attitudes toward new technology have evolved rapidly since last year’s survey. In 2017, 94% of Saudi respondents to the EY Growth Barometer said that they would never adopt robotic process automation. By 2020, 82% say they will have adopted AI and implemented robotic process automation, with 95% of respondents intending to do so within the next five years.
“While Saudi Arabian companies are at different stages of AI adoption, executives now no longer doubt its critical role in the future and have a new urgency to embrace AI and the business transformation that comes with its implementation,” comments Abdulrahman.
According to the EY survey, Saudi Arabian business leaders see the need to expand their geographic footprint beyond home borders if they are to become market leaders in their space. Overseas expansions is the leading growth priority for 29% of respondents, while 18% of middle-market businesses are aiming to grow at home.
Hiring diverse and skilled talent key to growth ambitions
Buoyed by confident revenue growth targets, Saudi Arabian business leaders are on a hiring spree with 58% looking to recruit more full-time staff. The greatest talent need, however, is more diversity, cited by 62% of Saudi Arabian respondents.
“Saudi leaders have put diversity at the top of their recruitment agendas and this emphasis is likely to be a result of the National Transformation Program 2020 and Saudi Vision 2030. Furthermore, the expansion into overseas markets, building external alliances, and investing in technologies to meet high growth targets will continue to drive the GDP growth of the country for years to come,” concludes Abdulrahman.
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About the EYGrowth Barometer
EY Growth Barometer is an annual survey that explores middle-market leaders’ growth strategies and how they are being delivered across a wide range of capabilities. These capabilities are linked to the EY 7 Drivers of Growth – EY’s framework to help companies accelerate growth. EY commissioned Euromoney Institutional Investor Thought Leadership to undertake an online survey of 2,766 C-suite (60% CEOs, founders or managing directors) in companies from 21 countries and with annual revenues of US$1m-US$3b.
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The EY worldwide Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we’ve helped many of the world’s most dynamic and ambitious companies grow into market leaders. Whether working with international, mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed.
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© Press Release 2018