Optimism among SMEs in the Emirates



An inaugural survey into sentiment among the UAE’s small and medium enterprises in the first quarter is largely positive.

Large majorities of SMEs surveyed by Gulf Finance, which specialises in lending to small businesses, said that orders, production, payments and access to capital had all improved since the beginning of the year.

Optimism about the future was widespread. Almost all respondents said that they expected business to grow and sales to rise.

“These findings suggest that the UAE’s SME sector is feeling optimistic,” said David Hunt, the chief executive of Gulf Finance. “[That is] an encouraging development given the importance placed on the sector by the government. “The respondents have experienced markedly improved payment collections, a rise in orders and production, increased recruitment and considerably better access to finance.”

A large majority of SMEs said they were planning to increase hiring. Logistics, retail and financial firms are set to experience the biggest increases in hiring over the next quarter. The financial sector posted the largest number of online vacancies of all industries in March, according to the monthly Monster employment index. Only about one in five SMEs said they were likely to boost wages over the next quarter.

This tallies with recent survey data from the recruitment agency Hays, which found there was a significant mismatch in employee and employer expectations of likely wage increases over the next year. Employees expect double-digit pay rises over the next year, Hays found, while employers expect wage rises of 3 to 5 per cent. The UAE Government has sought to promote SMEs as part of its efforts to diversify the economy away from hydrocarbons.

A Companies Law passed this month aims to improve the business environment for small firms. The law introduces limited liability partnerships for individuals, in a bid to reduce risks faced by entrepreneurs when launching new ventures.

In March, the Minister of Economy Sultan Al Mansourri said that the government planned to relax foreign ownership restrictions outside free zones for some sectors.

But the lack of a legal framework for insolvency, complicated company registration procedures and the costs of regulatory compliance make life harder for SMEs in the UAE, according to the World Bank. While the UAE is ranked 22nd globally on the World Bank’s Ease of Doing Business Index, the country performs less well in terms of starting a business, where it is ranked 58th.

abouyamourn@thenational.ae

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Company name: Cargoz
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Founders: Premlal Pullisserry and Lijo Antony
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

COMPANY PROFILE

Name: Mamo

Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua

Based: Dubai, UAE

Number of employees: 28

Sector: Financial services

Investment: $9.5m

Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors.

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Fuel economy, combined: 5.9L / 100km

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