Saudi business activity rises at quickest pace in three months in April

Saudi business activity rises at quickest pace in three months in April
Firms reported that an easing of COVID-19 restrictions had allowed local suppliers to increase their capacity. (Shutterstock)
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Updated 04 May 2021

Saudi business activity rises at quickest pace in three months in April

Saudi business activity rises at quickest pace in three months in April
  • Firms also expanded staff numbers for the first time in five months and to the greatest extent since November 2019

JEDDAH: Business activity in the Saudi Arabian non-oil private sector in April accelerated at the fastest pace in three months, owing to a significant rise in new sales as businesses recovered from the impact of the coronavirus disease (COVID-19) pandemic, according to the latest IHS Markit Purchasing Managers’ Index (PMI) survey.

Firms in the Kingdom also expanded staff numbers for the first time in five months, the index showed.

The seasonally adjusted PMI rose to a three-month high of 55.2 in April, up from 53.3 in March, indicating a significant improvement in non-oil private sector business conditions. Any score above 50 indicates growth, and the figure has been increasing every month since September 2020.

David Owen, an economist at IHS Markit, said: “The Saudi Arabia PMI rebounded in April to indicate a strengthening of growth across the non-oil economy. New orders picked up at the quickest rate for three months as business conditions continued to recover from COVID-19. The rise helped lead to a renewed uplift in employment, with the pace of increase the fastest since November 2019.

“Despite a boost to demand, the business outlook weakened from March as fewer respondents projected that output would grow in the coming 12 months. Current concerns among businesses included a possible further wave of COVID-19 that could exacerbate issues with foreign travel,” he added.

 

 

In the most recent survey period, 24 percent of companies found that output had increased. The expansion was fueled by a strong increase in new orders, with demand picking up for the first time this year amid expectations of COVID-19 measures being eased. Firms were also supported by a renewed growth in export revenues, which was mainly related to stronger demand from Asia.

Saudi Arabia’s private sector jobs also increased in April for the first time in five months. Furthermore, work growth accelerated to its highest level since late 2019. Efforts to increase capacity have helped to minimize backlogs, though at a slower pace than in September.

Despite some companies experiencing delays in receiving goods and products due to global supply chain issues, average vendor output improved for the third time in four months. Local suppliers were reportedly able to expand their ability due to the relaxation of COVID-19 restrictions.

Global supply issues, however, led to a significant increase in freight charges in April because of a rise in oil prices. In addition, raw material prices increased, resulting in a faster rise in total production costs compared to March. A number of firms passed these costs on to their customers by increasing their prices.

Concerns about the pace of the economic recovery from COVID-19, as well as the pandemic’s effect on tourism, were frequently expressed by respondents as the level of optimism decreased from the peak seen in December 2020.


France’s EDF helping Saudi Arabia achieve renewable energy targets

France’s EDF helping Saudi Arabia achieve renewable energy targets
Updated 4 min 16 sec ago

France’s EDF helping Saudi Arabia achieve renewable energy targets

France’s EDF helping Saudi Arabia achieve renewable energy targets
  • Despite pandemic delays, Kingdom’s largest wind farm set to begin operations this year

DUBAI: Like many executives around the world, Bruno Bensasson hasn’t been on a plane much in the last year. However, one of the few flights he did take recently was to Riyadh to check up on the progress of two massive renewable energy projects, showing the French company’s dedication to both the Kingdom and the renewable energy sector.

Saudi Arabia is aiming to generate 50 percent of its energy from renewables by 2030, with the remainder provided by gas. Bensasson is chairman and CEO of EDF Renewables, a subsidiary of French state-controlled
power group EDF.

His flight to the Kingdom was for the unveiling of a solar power plant in Jeddah, which is being built in partnership with Abu Dhabi’s renewable energy company Masdar and privately owned Saudi firm Nesma Co.

The consortium was awarded the 300-megawatt utility-scale photovoltaic solar power plant by the Saudi Ministry of Energy after it submitted a bid of SR60 ($16.24) per megawatt hour. The group signed a 25-year Power Purchase Agreement, and the plant is expected to be operational in 2022.

“These large-scale renewable installations are perfectly in line with the EDF Group’s CAP 2030 strategy, which aims at doubling its renewable energy net capacity in operation worldwide, between 2015 and 2030, from 28 to 60 gigawatt net,” Bensasson said at the time.

As of the end of 2020, 13.7 percent of EDF’s electricity output comes from renewable energy, with 76.5 percent coming from nuclear, 9.3 percent coming from fossil fuels (excluding coal) and the remaining 0.4 percent coming from coal.

EDF Renewables’ other big project in the Kingdom is the 400-megawatt Dumat Al-Jandal utility-scale wind farm project, located 900 kilometers north of Riyadh in the Al-Jouf region. The Middle East’s largest wind farm, construction began in August 2020 and reached the halfway point in April this year.

“We are now aiming at having all the turbines in operation I would say by Autumn 2021,” Bensasson told Arab News. Similar to the solar power plant, the wind farm was built as part of a consortium consisting of EDF Renewables and Masdar.

The $500 million wind farm will feature 99 wind turbines, each with a power output of 4.2 megawatts. It is predicted that that the first turbine will start creating power in the coming weeks, and when complete, will power 70,000 Saudi households per year and save 988,000 tons of carbon dioxide, helping the Kingdom achieve its Vision 2030 and Saudi green goals. Like many projects around the world, the coronavirus disease (COVID-19) pandemic has slightly delayed progress on the project. “There were some difficulties for staff and construction workers to access the site last year. We perfectly understand that, so it took some months — several months — to have the possibility to access the site,” Bensasson said.

It was not only the wind farm that was impacted — coronavirus affected the entire region. The Middle East saw a 5 percent year-on-year increase in its renewable energy capacity last year, down from 13 percent growth in 2019, according to the UAE-based International Renewable Energy Agency.

However, the global agency said that despite the slower growth in 2020, Saudi Arabia’s capacity has grown significantly over the last nine years — starting at only 3 megawatts and increasing to 413 megawatts in 2020.

Bensasson has worked in the renewable energy industry for almost 20 years, but believes that only now the technology has started to become a viable reality.

He said: “It’s my day-to-day reality, it’s really a booming reality. I would say that it has really changed since 2010. To give you a figure, in 2000, 70 percent of solar was developed in Europe, especially in Germany, Italy and Spain. And you will agree that they are not the biggest or sunniest countries. And same for wind. It’s totally different. About 60 percent of the growth now is within China and India. “Many countries have opted in.

And the reason for this shift, I would say, is twofold: One is economic and the other  is ecological.” Bensasson added that another factor in the growing popularity of renewables is the cost of wind production dropping 8 percent per year, and solar by about 15 percent per annum, making them “no-brainer solutions for many countries.”

EDF has been active in the Middle East for 20 years and has offices in Riyadh, Abu Dhabi, Dubai, Bahrain and Doha, with 199 employees.


$18m Saudi ready meals market to grow at annual rate of 5.4%

$18m Saudi ready meals market to grow at annual rate of 5.4%
Updated 9 min 9 sec ago

$18m Saudi ready meals market to grow at annual rate of 5.4%

$18m Saudi ready meals market to grow at annual rate of 5.4%
  • The ready meals segment consists of convenience food that requires minimum or no further preparation before consumption

RIYADH: The Saudi ready meals market was valued at $18.18 million last year and is forecast to grow at an average yearly rate of 5.43 percent over the next five years, according to a report by US-based research company Reportlinker.

“During COVID-19, individuals in Saudi Arabia exceeded their needs and rushed to buy and stock up on groceries as they feared food insecurity. Among Saudi consumers, stress-eating became very common due to lockdown,” the report said. The research also claimed that due to the closure of supermarkets at certain periods during the pandemic, online shopping became a necessity and this supported the surge in demand for ready meals.

“In emerging markets, like the Middle East, a relatively increasing disposable income is creating a new class, which is eager to experience new goods and services,” the report added. Despite concerns of food shortages in western countries, Ahmad BinDawood, CEO of BinDawood Holding, one of Saudi Arabia’s biggest supermarket operators, told Arab News earlier this month that this was not the case in  the Kingdom.

“The operation level that happened here, especially from the government side and us as retailers, and from the customers’ side, was amazing,” he said. “We made sure that there were enough supplies always in the market.”


Summit seeks ‘New Deal’ to ease Africa’s economic woes

Summit seeks ‘New Deal’ to ease Africa’s economic woes
Updated 15 min 41 sec ago

Summit seeks ‘New Deal’ to ease Africa’s economic woes

Summit seeks ‘New Deal’ to ease Africa’s economic woes
  • African economies risk running into a ‘financial gap’ of $290 billion by 2023

PARIS: French President Emmanuel Macron will on Tuesday host a virtual summit of European and African leaders to seek solutions to the financial crisis in Africa, where governments hope to boost development while managing massive debts.

The “summit on financing African economies,” bringing together 30 heads of state and government via videoconference, was planned last year after the International Monetary Fund (IMF) calculated that African economies risk running into a total “financial gap” of $290 billion by 2023.

Economic growth on the continent, which experienced its first recession last year, is expected to rebound to 3.4 percent this year and 4 percent in 2022.

A moratorium on debt servicing, put in place in April 2020 by the G20 and Paris Club group of creditor nations, has given Africa a bit of breathing space, suspending the repayment of €5.7 billion ($6.9 billion) by 50 countries.

The G20 also convinced China, by far the biggest bilateral lender on the continent, and private creditors to take part in future debt negotiations. But this won’t be enough.

“We are collectively in the process of abandoning Africa to solutions that date from the 1960s,” Macron said last month, calling for a bold “New Deal” for Africa.

The French leader warned of the risks of failing to act, including reduced economic opportunities, increased migration and “the expansion of terrorism.”

The coronavirus disease (COVID-19) pandemic has exacerbated the problems on the continent.

The African leaders called for an “immediate moratorium” on the servicing of all external debts until the end of the pandemic, and the ring-fencing of development aid.

They also urged the IMF to issue African nations special drawing rights (SDRs) convertible to global currencies like the dollar, euro or yen, to provide them with “the liquidity essential for the purchase of basic products and essential medical equipment.”

Macron has also suggested that the IMF sell gold to fund interest-free loans to African countries.

The conditions proposed by the IMF in exchange for its support are still under discussion.

On Monday, Ivory Coast President Alassane Ouattara asked the IMF to grant African states hoping to benefit from its financing more leeway in their public deficits.

Oxfam has called on the IMF and the World Bank to end “unfair or regressive fiscal conditionalities in the context of their loans and programs.”


EU pledges $9.7 million in fight against desert locusts in Africa

EU pledges $9.7 million in fight against desert locusts in Africa
Updated 19 min 18 sec ago

EU pledges $9.7 million in fight against desert locusts in Africa

EU pledges $9.7 million in fight against desert locusts in Africa
  • The latest outbreak is the worst recorded locust upsurge in Ethiopia and Somalia for 25 years

DUBAI: The EU has pledged €8 million ($9.72 million) toward the fight to combat the spread of desert locusts in Africa.

The EU contribution was from its European Civil Protection and Humanitarian Aid Operations (ECHO) and was welcomed by the director general of the UN’s Food and Agriculture Organization (FAO), Qu Dongyu.

“I want to thank the EU and all other supporters for their generous contribution and ongoing assistance in the battle to control the desert locust upsurge, enabling critical livelihood-safeguarding activities,” Dongyu said.

“National governments in collaboration with FAO and partners have achieved major progress in controlling this pest in East Africa, but operations must continue and we cannot afford to let down our guard.” The desert locust is considered the most destructive migratory pest in the world and a small swarm covering 1 sq. km. can eat the same amount of food in one day as 35,000 people.

The surge in the spread of the pest began in early 2020, but experts have warned that recent rainfall in the Horn of Africa has enabled swarms in eastern Ethiopia and northern Somalia to mature and lay eggs.

The latest outbreak is the worst recorded locust upsurge in Ethiopia and Somalia for 25 years and the worst infestation that Kenya has experienced in 70 years.

“As the region is already extremely vulnerable, given three years of drought followed by last year’s heavy rains and floods, compounded by COVID-19 and insecurity, desert locust swarms represent an additional shock that can have severe consequences for food security and livelihoods,” Keith Cressman, senior locust forecasting officer at FAO’s Desert Locust Information Service (DLIS), told Arab News in February.

Although Saudi Arabia has fought to contain desert locusts for decades, the FAO said the impending swarms pose a far greater threat to the Kingdom, Eritrea, Sudan and Yemen than those seen previously.

The Saudi government is taking precautions thanks to a well-established national program and the work of the Ministry of Environment, Water and Agriculture’s Locusts and Migratory Pests Control Center, based in Jeddah.


Oxford study: Return of US shale could derail oil market rebalancing

Oxford study: Return of US shale could derail oil market rebalancing
Updated 16 May 2021

Oxford study: Return of US shale could derail oil market rebalancing

Oxford study: Return of US shale could derail oil market rebalancing
  • With global crude prices heading back toward $70 a barrel, the financial pressures on US shale have eased

DUBAI: The rising oil price could allow for a significant return of US shale to the market in 2022, potentially threatening the rebalancing of the global oil market, according to an analysis by the authoritative Oxford Institute for Energy Studies.

In its latest monthly report, Institute Director Bassam Fattouh and analyst Andreas Economou wrote: “As we enter 2022, the US shale response becomes a major source of uncertainty amid an uneven recovery across shale plays and players alike. As in previous cycles, US shale will remain a key factor shaping market outcomes.”

With global crude prices heading back toward $70 a barrel, the financial pressures on US shale have eased, and producers have adapted to the constraints of lower demand. “There has been a shift in perceptions about this sector’s behavior. There is a widely held belief that US shale producers have endorsed the principle of capital discipline,” the authors said.

The key “rig count” — the number of drilling operations in progress on shale fields — is set to rise to 602 by the end of the year, a big jump from the 13-year low of 222 rigs last summer. While the direct relationship between rigs and production is complex, the authors concluded that rising shale output could affect the careful calculations of OPEC+, the producers’ alliance led by Saudi Arabia and Russia, to balance the global market.

“Unless demand underperforms relative to current expectations, an increase in US shale output of 0.95 million barrels per day could be absorbed, though this would reduce the overall supply deficit to 0.66 million. If the US shale growth hits the upper bound of 1.22 million barrels per day and demand recovery turns out to be slower than expected, then US shale could disturb the rebalancing, flipping the market into a surplus in Q4 2022,” the report added.