Analysis: PwC’s Saudi ban is a warning sign

Two unrelated events this week suggest that the boom time for foreign consultants in Saudi Arabia may be ending: Oil prices hit a three-year low of $68 a barrel on Wednesday, and PwC has reportedly been halted from securing new consultancy and advisory contracts with the Public Investment Fund until next year.

The Gulf is one of the few remaining growth markets for global consultancy firms, and Saudi Arabia has been a particularly lucrative destination. The kingdom’s Vision 2030 transformation has relied heavily on firms like McKinsey & Co., Boston Consulting Group, PwC, and others to design and execute economic and regulatory overhauls. Entry-level compensation is higher than London “even without adjusting for taxes,” according to The Financial Times, and the region has become a bright spot in a declining industry.

But as Riyadh tightens its grip on its budget and economic planning, spending reductions can be expected, with foreign consultants likely to be among the first to be cut.

PwC’s temporary ban — reportedly affecting its advisory business but without clarification on the specific type of work impacted — has not been confirmed or explained by either the firm or the sovereign wealth fund. The lack of transparency has added to the mystery surrounding the situation. The suspension has reignited debates about the dominance of foreign consultancies, with many Saudis expressing frustration over what they see as a monopoly by these firms, arguing that such dominance stifles the development of local expertise and opportunities. This sentiment underscores a broader call for economic sovereignty and the cultivation of homegrown talent.

This push for localization isn’t just rhetoric; it has forced foreign consultancies operating in Saudi Arabia to navigate a complex landscape.

The Saudization of consulting jobs is now in its second phase, which increases quotas and penalties. While foreign firms have been increasing local hiring, this is creating a challenge: Saudi professionals, after gaining experience, transition to government roles or local enterprises, attracted by competitive benefits and a sense of contributing directly to national development.

This trend not only leads to higher turnover but also enhances the capabilities of local institutions, potentially reducing the need for external consultants. It’s not hard to find sitting ministers with prior roles in foreign consultancies, exemplifying this shift.

Technology is another challenge for foreign firms. Data sovereignty has become a priority for Riyadh. Historically, foreign consultancies have had access to sensitive state data. The Saudi Data and Artificial Intelligence Authority is drafting new regulations with stricter controls on data storage and processing. The growing dependence on artificial intelligence tools, such as ChatGPT, which may involve uploading sensitive data, exacerbates these concerns and makes the work of consultants more complex in the kingdom.

The convergence of economic pressures, workforce nationalization, and data sovereignty is reshaping Saudi Arabia’s consultancy landscape. Firms will need to develop better career pathways to retain Saudi professionals or form partnerships with emerging local consultancies to blend global expertise with local insights.

PwC’s suspension isn’t an isolated case — it’s a reflection of a broader recalibration of the government and economy in Saudi Arabia. There’s still plenty of business to be done, but navigating a path to lucrative fees is becoming more challenging. The days of breakneck growth for consultancies in the kingdom may not be as certain, as shifting priorities and increasing scrutiny reshape the landscape.

Wael Mahdi is an independent commentator specializing in OPEC and Saudi Arabia’s economy, and co-author of “OPEC in a Shale Oil World: Where to Next?”