Complex Made Simple

Grand post-COVID-19 plans for GCC SMEs meets austere reality

According to a recent survey of over 30,000 small business leaders from more than 50 countries, a total of 26% of SMEs worldwide suspended their activities between January and May this year due to the pandemic, with some countries reaching as high as 50%.

Surveyed SMEs in the MENA region showed 51% in Egypt, 50% in the United Arab Emirates (UAE ) and 35% in Saudi Arabia reduced their employee numbers due to the pandemic. However, the survey also noted post-pandemic business optimism, including 61% in the UAE, and 59% in Saudi. 

And experts are predicting a GCC “SME boom” as a new wave of regional entrepreneurs emerge out of the COVID-19 pandemic.

Let’s first look at that encouraging piece of news, and later look at the current reality facing the sector and at ideas to move forward in the new normal.

On the brighter side 

Commercial registrations have seen triple-digit increases in recent months with tender boards across the region awarding tens of millions of dollars in contracts to these enterprises.

Analysts are hailing the post-Coronavirus economy as an “era of startup growth.

Pakiza Abdulrahman, Manager of Business Development – Startup at Bahrain’s Economic Development Board, said: “Across the region, governments are putting startups and SMEs front and center as they seek to regrow and diversify their economies, and this new era of startup growth is only set to increase post-COVID.”

“Targeted support packages are indicative of governments prioritizing small business as being the engine of the Gulf’s post-lockdown recovery, and we are already seeing the results of this SME boom.”

The Bahrain government announced plans to subsidize electricity bills for SMEs to the tune of $63.7 million to help bolster national economic growth.

In August, the Bahrain Tender Board announced that in H1 it had awarded 47 public tenders worth a combined $21.8 million to SMEs in that Kingdom.

Individual commercial registrations are soaring in Bahrain, up 109% in June alone.

In Saudi Arabia, the SME segment is providing 64% of total employment in the Kingdom. Under Saudi Vision 2030, the Kingdom plans to raise the contribution of SMEs from the current 20% of GDP to 35% by facilitating their access to funding and encouraging financial institutions to allocate up to 20% percent of overall loans to them.

As of last year, the UAE’s Ministry of Economy estimated that the SME sector represents more than 98% percent of the total number of companies operating in the UAE and contributes towards 52% of non-oil GDP, a figure the ministry wants to increase to 60% by 2021.

Areije Al Shakar, Fund Director at Al Waha Fund of Funds, said that in the first half of this year, the MENA region saw $659 million raised, equivalent to 95% of total venture investments raised in 2019. 

On the darker side

The MENA region saw markets close on a weaker note in August, which can be broadly attributed to sentiments in global markets coupled with a slowdown in the private sector according to the latest PMI readings.

MENA investors might continue to remain cautious, especially after a slowdown in the private sector and a decline in oil prices.

Leading global professional services firm Alvarez & Marsal (A&M) has released its latest Saudi Arabia Banking Pulse for Q2 2020. The report is another indicator suggesting that the profitability outlook for banks remains subdued, as a result of the twin effects of low oil prices and Covid-19 lockdowns, which might impact credit demand and asset quality. 

There was also a rise in non-performing loans by 9.6%. Aggregate Loans & advances (L&A) stood at 1.9%, the slowest in the last five quarters for the top 10 KSA banks in Q2’20. Slowing economic activity on account of COVID-19 lockdowns impacted credit demand.  

Ideas for SMEs

According to the IERD-Global SME News Webinar Series, titled “Navigating the new normal: A post-COVID approach for SMEs”, the COVID-19 pandemic has impacted micro, small, and medium (MSMEs) sized businesses the world over, a sector that represents more than 70% of global employment and 50% of GDP, according to the International Labor Organization (ILO).

Anita Joseph, a journalist, author, and digital marketing professional called for SMEs to adopt digital technologies, in line with the new normal, but with a well-designed strategy. She said, “There is no single one-size-fits-all strategy, but today we’ve come to realize that digital marketing is much more than just a website.” 

She said that social media & content marketing, data management, and SEOs are the right tools for lead generation.” 

“Hyper-personalization is also a very new and popular digital marketing technique using data and technology to analyze customers, and target products and services. Today it is easy to adopt hyper-personalization because modern-day customers use no less than 2-3 digital devices, such as mobile phones, laptops, or any other wearable tech. So data is abundant and technology helps businesses decode this data and gather mounds of information about customer lifestyles and online behaviors.”