SMEs navigate the Covid turbulence

08 July 2020
Support from the government, larger enterprises and other entrepreneurs is welcomed in minimising the impact of the crisis

The widespread impact of Covid-19 has left hundreds of thousands of businesses in the lurch across the globe. But none seem as debilitated as small and medium-sized enterprises (SMEs), which lack the resources and financial stability of larger companies.  

“With the inevitable global slowdown, Covid-19 has showed that it is here to stay longer and affect us deeper than what we were anticipating,” says Renuka Gunjahalli, founder and business consultant, Jupiter Business Mentors (JBM). “Things will not be the same again.” 

According to the UAE Ministry of Economy, SMEs constitute more than 94 per cent of the total number of companies operating in the country and provide jobs for more than 86 per cent of the private sector's workforce.  

The business sector had its share of challenges even before it was struck by Covid-19. Increased competition, financial constraints, remaining profitable and limited access to international markets were just the tip of the iceberg. 

However, the pandemic has exacerbated these problems. 

“The impacts [of Covid-19] were felt in various parts of our business in different ways,” says Ashish Panjabi, chief operating officer at Jacky’s Group of Companies.

“For our retail businesses, we obviously saw this come to a grinding halt and we have seen sales come back, but we are still not at levels they were at pre-lockdown – that said, anything is better than being at zero as we were for the one month of lockdown.

"Our e-commerce sales, however, jumped during the first two months of the lockdown and we have seen many sales categories emerge during this period which traditionally didn’t sell as well from our stores. ”  

The pandemic also took away the most critical thing for any successful business – physical interaction. 

“Most SMEs are run with a physical presence as the fundamental offering,” says Ziad Matar, president of TiE Dubai.

“Businesses in the real estate, fitness or hospitality sector for example, require human interaction which was strongly challenged under the Covid-19 restrictions. While everyone was confined to their homes in an effort to curb the virus spread, their only option was to go digital, and they have been rapid in embracing this shift as a survival tactic, turning it now into a strategic choice for their future.” 

For the innovation-driven SME sector, going digital is not by any means a new phase. However, the current market situation makes it difficult to stay optimistic. Employers have strived to keep up spirits among their staff. 

“As a practice, we connect twice a day, once in the morning to discuss what has to be conquered during the day and once in the evening to take stock of what has been delivered and if there were any pressing issues that need immediate attention,” explains Gunjahalli. 

“The decision-making process is crucial during these times, so we make sure we discuss all the elements on calls and swift decisions are made which are beneficial to the business.” 

Support mechanisms 

The months following the Covid-19 outbreak have seen the UAE government introduce economic initiatives to support the business sector, with many focusing on SMEs. 

Dubai SME allocated AED20m for the capital guarantee scheme launched by its financial arm Mohammed bin Rashid Fund. 

The Dubai government launched an AED1.5bn economic stimulus package for the second quarter of 2020, which seeks to enhance liquidity and reduce the impact of the current global economic situation.  

SMEs were also able to avail rent relief schemes and loan deferments under the UAE government guidelines. For example, Dubai’s Freezone Council announced plans to postpone rent payments for up to six months as part of the economic stimulus package. 

“The reduction of market fees from our trade licence renewals and the deferment of VAT payments for the month of April were certainly welcomed from a cash flow perspective,” says Panjabi.  

“Our commercial property installment was automatically deferred for one month,” says Gunjahalli. “Our credit card was used to pay our VAT liabilities and office bills, which was a huge sum, but the statement billing was deferred by virtue of an opt-in service. These bailout initiatives helped us with major cash reliefs.” 

However, the challenge with the support initiative launched by the government is that not all startups and SMEs are aware of how to avail it.  

“While excellent support has been offered, the awareness campaign should focus on educating the ones who are affected with relevant information on where they should apply to avail these measures,” says Gunjahalli. 

Larger firms also have a role to play in supporting local SMEs, by redirecting funds or offering grants to smaller businesses as part of their CSR initiatives.  

“With the creative capabilities of startups and their entrepreneurial drive, they would be rid of dated concepts and more focused on turnaround time and pivoting towards innovative approaches,” says Matar.

“We work with the support of our partners such as HSBC, Du, Skyline University Collage and Danube on helping entrepreneurs navigate these uncertain times through our various programmes.” 

Matar also highlights further initiatives that can support SMEs. Government and academic institutions as well as EdTech startups can offer online classes and/or free lessons online to help enhance skills while people continue to stay home.  

Meanwhile, established agencies have the opportunity to highlight the work done by their outsourced talent by promoting their creative freelancers or boutique firms. 

The road ahead 

“The challenge for liquidity will remain,” states Panjabi. “While many banks have come in for support, they are also limited. The UAE government has done an admirable job and is open to listening. They have given us support even though many of their own income streams have slowed or stopped.” 

Panjabi notes that travel, tourism, hospitality and retail will all be different going forward.   

“It is a question of adapting and waiting it out in the short to medium term,” he says. “However, there is an opportunity to be the first mover in solving challenges that businesses or people face and responding to it within your business so keeping your eyes and mind open is essential.” 

JBM’s Gunjahalli notes that as investors analyse market trends to shape their investment decisions, businesses that spark innovation in industries that have been at the forefront of the pandemic will receive a lot of investment. 

“Economic landscape and business practices will inevitably change,” she says. “No doubt it will be a difficult couple of years, but at the end of the day change is the only constant.” 

Matar firmly believes SMEs and startups are and will always remain an integral part of the UAE government’s approach to enhancing the private sector and diversifying the economy. 

“The UAE’s strong focus on innovation and entrepreneurship has boosted its appeal around the world as an attractive startup hub,” he says. “In fact, the country has positioned itself as a landing pad for startups around the world, bringing in emerging technologies, solutions, innovators and entrepreneurial risk takers.” 

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