How the gig economy is disrupting the region’s startup ecosystem
With 70 million platform workers registered globally, economists predict that by 2025, talent platforms will mediate one third of all labour transactions. Today, these platforms are estimated to make up 1 to 3 per cent of total US employment, or 35 per cent of US workforce, contributing up to $1 trillion to its total economy according to recent statistics.
The wave is slowly making its way into the Middle East and North Africa (Mena) region to provide short-term and on-demand labour opportunities for historically disadvantaged populations like women, unemployed educated youth, and underprivileged unbanked communities - including 69 per cent of the 1.3 million Syrian refugees in Jordan. In Egypt alone, there are 14 million gig workers, and the number is pushing the government to provide these workers with health insurance and emergency aid, at least temporarily.
Other Mena countries are slower to revisit their regulatory grey zones, but that has not affected the emergence of talent platforms, both gig and freelance marketplaces, around the region. Gig platforms like UAE-based Ureed, Saudi-based Sabbar and Marn, and Jordan-based Kader are leading the Mena gig scene, which has raised close to $10 million in venture capital funding so far this year across five deals.
At the same time, attention among investors is also starting to build up for gig-work startups and large regional VCs like Vision Ventures, STV, and VentureSouq are placing their bets on hourly-work staffing platforms like Saudi-based Marn to drive a technology-driven, youth-centred, market disruption.
“After 2019 and especially post Covid-19, investors are doubling down in the gig economy marketplace. There is the perception that five years down the line, especially in Saudi Arabia, young millennials will want to participate in gigs rather than full-time work opportunities,” says Mohamed Ibrahim, founder and CEO of Riyadh-based blue-collar staffing platform Sabbar.
With 150 partnering clients and 5000 gig workers, the two year old startup is planning to expand across Saudi Arabia to target youth in Makkah, Jeddah, and Al-Madinah as it closes its current pre-Series A round.
While platform workers outside the Mena region remain largely dominated by males seeking additional income streams, project-based flexible employment is becoming the preferable career model for digitally-native millennial and Gen Z populations according to research by A.T. Kearny and Misk Foundation. They predict that by 2035, digitisation will reduce the total amount of time-on-job which will give rise to part-time, result-oriented employment instead.
“It’s not a choice anymore, it's a global movement,” says Bandar AlMohamadi, CEO and Board Member at Saudi-based government-owned company Future Work that has been established to oversee the country’s adoption of gig work.
The company has built over 12 partnerships with local gig work platforms and is working directly under the Ministry of Human Resources and Development, the company’s chairman, to mediate between regulatory bodies and gig work initiatives.
“There are major corporations today like Microsoft and Google adopting gig work models to crowdsource for talent across borders. If you take a look at Nasdaq’s big tech companies, you’ll see them doing the same. The age of corporate structures is starting to vanish and workers now have the opportunity to work with multiple clients without being attached to one corporate body. This brings in freedom and better work-life balance, and this is what’s attracting younger generations, particularly Gen Zs, to enter the labour market and to prefer a gig work model,” he adds.
This is particularly crucial in terms of market growth for talent marketplace startups, as the Mena region is expected to double its population rate by 2050. With the exception of Lebanon whose population is projected to shrink, the UN estimates a general population increase across the Mena region to reach 740 million by 2050 of whom more than half will be under the age of 25.
The emergence of non-contractual gig models has been transformative in addressing the difficulty to localise low-skilled, seasonal jobs in industries like retail and hospitality, according to both Ibrahim and AlMohammadi, and has brought to the surface the need for alternative payment solutions for wages and salaries. This has given rise to regional fintech startups that provide peer-to-peer (P2P) transactions and accessible capital for unbanked populations in Egypt, UAE, and Northwest Africa among others.
“The current financial system doesn't cater for gig workers,” says Ibrahim of the Saudi landscape, “banks wouldn't provide financing solutions for gig workers given that their income is unpredictable and not perceived as a salary. There's ample opportunities for fintech startups to serve a rising number of gig workers with solutions for credit cards, automotive finance, and home loans”.
Fintech startups like Egypt-based Dayra and UAE-based Ziina are trying to address this challenge and have recently raised $11.5 million funding in total from both regional and international firms.
Yet, partnerships with fintech platforms can still be tricky, explains Al-Hassan who clarifies that currently, the only way to verify a reliable credit and transaction history, which are both needed to access micro-loans from a fintech company, is by securing bank accounts for gig workers.
In Saudi Arabia, where the country is experiencing a slight decrease in its total unemployment rate to reach 11.7 per cent from last year’s 12.6 per cent, its exclusion to count independent workers as neither employed or unemployed leaves independent youth workers unable to register for social or medical insurance. This leaves little room for platforms like Sabbar or Marn to manage work-related injuries.
The lack of classification for independent workers is also leaving them unable to counteract both “unprofessional” hiring techniques and societal views on freelance, on-demand, or independent work.
“One of the challenges is the way society views freelancing. The concept of not being connected to an employer is still strange, but there is a lot of potential for the country to support this and raise awareness,” says Leen Khogeer, a Saudi-based freelance illustrator, who believes the lack of freelance regulations makes it a habit for clients “not to expect contracts”.
But national initiatives to address the regulatory gaps are currently underway, according to AlMohammadi, and in places like Jordan where the overwhelming legal ambiguity is starting to fade, Ra’d Al-Hassan, co-founder and CEO of Jordan-based on-demand hiring app Kader, was able to secure partnerships to provide Kader’s 500 gig staff with the right job security.
“The Covid pandemic has affected gig workers heavily, so we aim to provide our ‘Kaderos’ with protection, financial inclusion, and reward and loyalty programmes,” says Al-Hassaan. “We were able to partner with a leading bank in Jordan to process payments automatically on a weekly basis and open up bank accounts. We were also able to provide micro-insurance with local insurance companies to cover on-the-job injuries based on the rating, income, and commitment of our Kaderos.”
Launched in 2020, Kader has also partnered with Careem to provide free rides for its gig workers and has gathered attention from the US, winning the MetLife Foundation Pitch and receiving venture funds from US firms who, according to Al-Hassan, are more accepting of the idea of gig startups.
As it closes its Seed round soon, Kader continues to show how emerging startup models can truly achieve disruptive changes both in the regulatory and startup space by keeping an open line with regulators.
“At the end of the day, our partnerships are all compliant with the rules and regulations we didn’t go out of scope,” says Al-Hassan. “It's about utilising the current rules and regulations where we can change a few market dynamics while sticking to the current systems in place.”
Empowering the local grocer
Across the region, unrevised legal frameworks make the process of hiring non-nationals as gig workers highly complicated. In Jordan, the third country in the world with the highest Syrian refugee population, numerous licences and certificates are needed to hire Syrian workers, while in Saudi Arabia, despite recent experimental initiatives, the guidelines are more direct in excluding non-nationals to be registered in gig work platforms.
However, nationalisation can, on the other hand, offer gig work startups a unique opportunity to modernise the region’s least digitally-literate workforce.
Founded in 2019, Workhint is a Saudi-based Saas startup that allows local businesses and small shop owners to launch a fully customised talent marketplace to include gig workers, temporary employees, and part-time and full-time staff.
“I find local clients who want to build part-time talent systems but they are not technologically-savvy or haven’t even been exposed to technology and we want to simplify that,” says Mahmood Alabbas, founder and CEO of Workhint who currently serves 17 clients across Saudi Arabia, Dubai, Jordan, Oman, and Nigeria.
“For a local grocery store whose clients are well-known and from local neighborhoods, they’re not going to be using a popular app for delivery drivers, it's too sophisticated,” he says.
Besides its recruitment, management, and payroll solution, Workhint is aiming to use its current Seed round to secure the financial grounds to introduce a new business model that has the potential to revolutionise the region’s talent industry.
“We want to introduce something called a Global Mobility Compliance for talent,” explains Alabbas. “Through partnerships you can build an infrastructure that makes it eligible to do business all over the world. Once implemented in the platform, we are going to be fully liable for our talent and if a business wants to employ someone in Egypt, for example, the legal document we will need is just going to be our [virtual] location in Egypt.”
With their potential to create a market shift, their constant communication with regulators, and their tendency to engage younger and disadvantaged populations into a decentralised global space, gig work startups are set to strengthen the pressure for both private economies and governmental institutions to introduce holistic means of support for independent, precarious labour.
“To fully adapt a gig model we need to have the right fit-for-future skills economy, because the more skillful you are, the less important the employer or the corporation,” highlights AlMohamadi. “These are workers who are more resilient and who won’t get affected [by changing market behaviours], because it wouldn’t matter to them if they have a sole employer, they are able to act, independently, as service providers themselves. So this is where we need to revisit the wider education strategy.”