Small businesses must adapt to survive Covid-19

16 July 2020
After months of lockdowns, the Covid-19 pandemic is threatening the survival of many SMEs. Action is needed to create a supportive ecosystem for small firms

“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

Growth sectors

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.

Gulf Capital and MEED-GlobalData launch ‘SME Insights’ to help SMEs grow

The new digital initiative will connect SMEs with investors and business leaders in the post-Covid-19 world

Gulf Capital SME Insights, a new digital initiative by Gulf Capital and MEED-GlobalData, has been launched to support the region’s SME economy. The digital platform will provide access to invaluable resources and host experts for live discussions on critical topics relevant to SMEs navigating a challenging financial climate amid the Covid-19 pandemic.

In their ninth year of supporting and celebrating SMEs, Gulf Capital and MEED-GlobalData have come together to launch a multi-channel programme of activity to provide SMEs with the information, intelligence and support to make efficient business decisions and adapt corporate strategies to achieve success following Covid-19.

Studying the impact of Covid-19 on the startup ecosystem across the Mena region, a recent report found that 59 per cent of small businesses said they had already been impacted by the crisis[1]. The same report found that 48 per cent of startups surveyed cited revenue generation as a major concern, and 41 per cent foresee lower-than-expected revenue growth rates in 2020.

“SMEs are undoubtedly the backbone of the global economy. The importance of this sector to the GCC economy is no different, with SMEs creating employment opportunities, championing creativity and driving innovation in line with regional economic growth visions," says Karim el-Solh, CEO of Gulf Capital.

"It is essential that we protect our SMEs more than ever due to the catastrophic economic impact of the Covid-19 pandemic and falling oil prices,” he continues. “To support SMEs during this challenging time, we have joined hands with MEED-GlobalData to ensure that the SME community has the necessary foundations to respond, grow and succeed in the New Normal.”

The first webinar in the series of live broadcasts aired on 30 June 2020, featuring industry leaders from Hub 71, IBM, The Camel Soap Factory and Gulf Capital.

Future editions of the bi-monthly webinar series will cover overarching themes around technology, financial solutions, legal perspectives and communications strategies, featuring a panel of industry leaders – including Oracle, startAD and in5 – to address the key challenges faced by SMEs in the region. Following the webinar, a virtual roundtable will allow for additional dialogue between participants and individual moderators for further insight and awareness.

The series of virtual sessions will conclude on 9 September 2020 with the Gulf Capital SME Insights Summit. This virtual summit will bring together industry experts and thought leaders to provide valuable insights on the way forward. Following this, an awards reception on 9 December 2020 will be hosted to celebrate the SMEs that have demonstrated outstanding resilience, agility and innovation to sustain and grow their business.

“Covid-19 is having a devastating impact on many small businesses,” says MEED editorial director Richard Thompson. “Lacking the financial reserves of big companies, with limited revenue streams, and dependent on a small pool of key employees and suppliers, SMEs are extremely vulnerable to systemic shocks. After four months of social distancing and lockdowns, many are facing extinction. 

“The SME sector is vital for innovation, new job creation and growth,” says Thompson. “It is imperative that key actors such as governments, banks, landlords, tech companies and others come together to support SMEs in the UAE and the GCC to create a sustainable enterprise eco-system in the region that will help SMEs to thrive in the post-Covid economy.

“Through Gulf Capital SME Insights, we are providing a platform to support the GCC’s SME sector, helping small businesses to achieve sustainable growth and profitability,” says Thompson. “Over the coming months, this initiative will connect SMEs with prominent companies and investors, and provide them with a wealth of resources for support and inspiration.”

The virtual broadcasts are free to watch, but pre-registration is required (click here). After the event, the session will be available to view on the Gulf Capital SME Insights website.

Full details on the upcoming programme will be available on the Gulf Capital SME Insights website.

Gulf Capital SME Insights is supported by Audit partner: Grant Thornton; Association partners: Dtec, in5, She Is Arab, startAD, TiE Dubai; Communications partner: Four Communications; Endorsing partners: Dubai SME, Khalifa Fund For Enterprise Development; Knowledge and Research partner: Diligencia Consulting Limited; Leadership partner: Young Arab Leaders; and Strategic partner: Beehive P2P Limited.


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