“Every business, no matter how small, has a really important role to play in the business ecosystem,” says Stevi Lowmass, founder and CEO of The Camel Soap Factory, a Dubai-based producer of luxury soaps. “I am concerned that this rich diversity of small business might be lost in the UAE for some time to come.”
Small and medium-sized enterprises (SMEs) contribute about 52 per cent of the UAE’s non-oil GDP, according to Ministry of Economy estimates in December 2019. But without significant financial reserves or the flexibility to cut costs, small businesses are vulnerable to systemic shocks. As a result of the massive disruption caused by Covid-19, this vital element of the UAE economy could collapse.
While the UAE government is credited with taking swift and focused action to mitigate some of the effects of the crisis, much of this support has not filtered down to the region’s SMEs.
Speaking at the Gulf Capital SME insights Live webinar, Lowmass said her business, like many others, is fighting for survival. Finding enough working capital to pay for basics such as raw materials and rent is tough.
Lowmass says financial support is difficult to find for small businesses. The cost of borrowing from banks in the region is high for SMEs, while peer-to-peer finance platforms are also struggling to attract investors.
Every crisis has a winner ... You have to continuously innovate; standing still is not an option
Karim el-Solh, Gulf Capital
But despite the challenges, the current economic uncertainty can be an opportunity for SMEs to leverage their small size with a fast and flexible approach.
“Every crisis has a winner,” says Karim el-Solh, co-founder and CEO of Dubai investment company Gulf Capital. “So how can you come up stronger on the other side of the crisis?”
The first step, said El-Solh, is to save the business by cutting costs and reducing rental space where possible. The second stage involves a more detailed examination of the business structure looking at changes to reduce the rate of spending, maximise free cash and look at new ways to develop products and services. The final phase is long-term planning to expand into new markets and invest in growth areas.
“So it's not all about firefighting,” said El-Solh. “You have to continuously innovate; standing still is not an option.”
Hub71 is a tech ecosystem based in Abu Dhabi Global Market Square
Abu Dhabi-based Hub 71 is a community of founders, investors and business enablers that support the establishment and growth of new tech companies in the region.
Head of business development and partnerships at the organisation, Nader Museitif, agrees that there are opportunities for SMEs to benefit from the current crisis.
Large companies are finding that gaps in their supply chains can only be filled by smaller companies, he says. In addition to this, government bodies have KPIs and targets to work with SMEs, and subsidies are available to assist SMEs.
Everybody realises that it's the time to have conversations on economies of scale
Asma Shabab, IBM
Despite contraction in many sectors, there is still investment going into healthcare, fintech and tech startups, online education tools and local food production.
Of course, the digital transformation of businesses and homes has been the most marked development during the Covid-19 crisis.
“We're seeing very different business models,” says Asma Shabab, strategy consultant for the Middle East and Turkey at IBM. “Companies have started to create e-commerce platforms to be able to connect to customers better.”
But creating a digital channel is both complex and expensive, so synergies and collaborations are developing between large, medium and small enterprises. One example of this is the partnership between Dubai Mall and e-commerce platform Noon to create a virtual store inside the Noon website.
“Everybody realises that it's the time to have conversations on economies of scale,” says Shabab.
But Lowmass says this is sometimes easier said than done. The Dubai-based entrepreneur says she has been struggling for some time to introduce her products to online giants such as Amazon and Noon. They appear, she says, to be swamped with similar requests and unable to accommodate more vendors at this point in time.
Characterised by low turnover, high dependence on fewer employees and a smaller range of products and services than their larger counterparts, most SMEs are not able to cut costs significantly without damaging their business, nor is it easy for them to diversify or apply digital strategies.
“It's just [about finding] the time to do it and being able to stay alive to finish the job,” says Lowmass.
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