Abu Dhabi, UAETuesday 11 August 2020

How UAE residents are managing their finances during the pandemic

While some are saving more, others are balancing a drop in income with lower spending

UAE resident Haitham Essam fears his retirement pot will be affected by coronavirus. Antonie Robertson/The National
UAE resident Haitham Essam fears his retirement pot will be affected by coronavirus. Antonie Robertson/The National

Economies across the globe are under pressure as they try to digest the devastating effects of the coronavirus outbreak, with central banks stepping in to help businesses and employees survive the crisis.

The pandemic is the greatest challenge to the global economy since the 2008 financial crisis, wiping trillions off stock markets worldwide, disrupting global supply chains and bringing some sectors, such as tourism, to a complete halt. It's only natural for salaries and jobs to be affected.

Ask for help: we’re all in this together. This is our age’s test and we must rise up to it.

Louis Lebbos, AstroLabs

To offset this in the UAE, authorities have rolled out a Dh126 billion stimulus package to support the economy, which includes Dh100bn in support from the Central Bank of the UAE to help lenders offer financial relief to consumers and small businesses. Support measures include debt repayment holidays for up to six months and lower charges. Meanwhile, free zones, utility companies, developers and schools have also announced fee cuts to help ease the strain on our personal finances.

One of the first steps someone whose income is affected by the outbreak should take is to contact their bank to ask for a payment holiday on any debt obligations, says Ambareen Musa, founder and chief executive of money comparison site Souqalmal.com.

“For those with an active mortgage, auto loan or personal loan, relief from repayments may just be one call away,” she says. “You can also take advantage of interest-free instalment plans of up to six months (in some cases with zero processing fees) on school fee payments, grocery purchases as well as utility bill payments made with your credit card.”

She also advises cutting all discretionary spending. “Stick to the basics and cancel all memberships and subscriptions that you don’t need,” she adds.

Louis Lebbos, founding partner of AstroLabs, a Mena-wide training academy and accelerator, which has a co-working space in Dubai, says SMEs should “try to be creative” during these times. “For example, we changed all our face-to-face training programmes, accelerators and incubators into remote live formats,” he says. "We also created new programmes for companies working on improving their e-commerce offering, which is crucial at this time."

Adam Zargar, director of Dubai-based UAE Coaching, a life coaching company, says with every crisis comes an opportunity. “There will always be volatile situations and each has its own narrative and ‘end-of-the-world’ feel - the financial crisis of 2008-09 or Sars, for instance. People end up believing the situation will not be recoverable - even though it always has been," he says.

For now, Mr Lebbos advises making "cost cuts immediately”.

“We hope to get out of this soon, but you should be planning for a scenario where this lasts a few months. It might be cost avoidance or cost delays – which, in some instances, are easier," he says. "Finally, ask for help: we’re all in this together. This is our age’s test and we must rise up to it.”

Here, four UAE residents reveal how their finances have been affected by the outbreak:

Abu Dhabi resident Tuan Phan started saving more two months ago to protect his finances. Antonie Robertson/The National
Abu Dhabi resident Tuan Phan started saving more two months ago to protect his finances. Antonie Robertson/The National

"I've been saving more money for the past two months just in case"

Tuan Phan, of non-profit community SimplyFi.org, says he has been saving a little extra every month since January when the outbreak started “just in case”, and has added an extra Dh2,000 to his Dh5,000 UAE cash reserve.

At the start of the year, he cut his budget back to the bare bones to save an extra Dh5,000, getting rid of his home internet package, bulk-buying and putting a stop to meals out. He also slashed entertainment and supermarket bills back to a maximum spend of Dh1,000-Dh1,500 in total.

After flights were cancelled going in and out of the UAE, his wife, Betty, and their two young children have remained in Lagos, Nigeria, where they were visiting family.

So Mr Phan is now budgeting to pay for their extended stay in Africa, sending his wife Dh5,000 to buy supplies for herself and her parents, who are in the high-risk category, as well as Dh4,500 to his brother in Australia to buy extra supplies and medicine for himself and their mother, who has autoimmune problems and needs to remain isolated.

He says everyone should “hold on to any spare cash and limit any use of credit cards”. “You don’t want to make it through this pandemic with a big financial hole that takes years to recover from,” he warns.

Mr Essam says the crisis is affecting revenue at his laundry business. Antonie Robertson/The National
Mr Essam says the crisis is affecting revenue at his laundry business. Antonie Robertson/The National

"I'm worried about my retirement pot"

Haitham Essam, a 43-year-old business development director, says he is worried he will lose the retirement pot he invested in a laundry company.

Mr Essam, an Egyptian who lives in Jumeirah Beach Residence with his wife, invested in the company three years ago when it was a small shop about to go bankrupt. He and four partners poured in Dh2.5 million and it had finally reached a positive cash flow just this year.

"The plan was that, in three years, this alone could be my retirement plan, or the business that I can fully depend on if I quit my full-time job," he says. "I am grateful I still have my job but it is a big hit and who can factor this into their plans?”

Over the past fortnight, revenue for retail customers has dropped to 40 per cent of what they were for the same period in February, he says, while they have fallen in the business segment – among gyms, spas and universities – by 50 per cent, with eight contracts on hold.

Two of the 17 staff have been let go while another two are on unpaid leave in their home countries and one delivery van has been returned to the rental company.

While Mr Essam fears fixed costs such as his Dh10,000 warehouse rent, Dh10,000 Dewa bill and salaries will destroy the business, the government's stimulus packages for SMEs and start-ups offer him some respite.

Water and electricity bills for malls, shops, hotels and plants have been reduced by 20 per cent for three months from April, and there is a six-month deferral of connection costs and a freeze on reconnection fines. Developers such as Nakheel, Rak Properties and Sharjah’s Alef Group, are also offering residential and business tenants, particularly those in retail and hospitality, free rental periods or rent holidays and reduced district cooling charges.

Mr Essam says his wife, Yasmine, resigned from her job as an education programme manager in January; the new job offer she was expecting has been “stalled” by Covid-19.

Banks are also offering SMEs the option of deferring loan repayments for three months with no additional charges, while bank merchant service fees on credit card transactions – which can be a significant cost for retailers – are being halved. Interest charges are being lowered for new loans, and the minimum balance SMEs must maintain in their account has been dropped to Dh10,000 per month, to provide more liquidity.

"My overseas contracts have dropped off but I'm also spending less"

Jeff Evans, a 48-year-old global educational consultant, has seen his workload drop 80 per cent as schools around the world are shuttered.

Mr Evans, who is British and has been in the UAE 11 years, lives in Al Ain where his two children, a 14-year-old daughter and 18-year-old son, are at school. Their fees, of around Dh140,000, are covered as part of his wife’s teaching package, although his son has now finished school without completing his A-level exams, due to the shutdown.

He says his consultancy relies on long-term contracts with private schools. “Given the current situation, there is significant uncertainty,” he says. “I am around 80 per cent down on an ideal scenario of full-time work.”

His Dh39,000 annual rent is paid up until August, but Mr Evans needs to pay Dh25,000 to renew his licence in June. Relief is coming, though, with some free zones postponing rent payments for six months and offering discounts on licences.

Dubai Multi Commodities Centre (DMCC) – the UAE’s largest free zone with over 7,300 active registered companies – is offering 30 per cent discount to renew licences and an 80 per cent reduction in set-up costs of new companies in Jumeirah Lakes Towers. “The economic well-being of our members and our community as a whole are key to ensuring we emerge from this situation stronger,” said Ahmed Bin Sulayem, executive chairman and chief executive of DMCC.

Mr Evans says he has found some international work, including a remote audit of a group of schools in Asia, and is trying to “move some work online”, offering consultancy and professional development to schools or educational groups. But he is also applying for fixed-term jobs.

“The timing is difficult, as schools generally wind down in May and June,” Mr Evans says. “I can manage short-term." One silver lining, he says, is that he is saving Dh300 a week in petrol for his usual commutes to Dubai and Abu Dhabi.

"I'm balancing my lower salary with lower spending"

Hospitality worker Daniel, 49, also British, who did not want to be identified, has had his salary halved by his employer for the "foreseeable future".

Daniel, who lives in the Greens, says orders have “dropped dramatically” and his company has been “hit hard”. He turns 50 later this year and had hoped to retire in 10 years’ time but laments, “I have a feeling that, unless things get back to normal pretty quickly, that might not happen: 65, or even 70, will be the reality.”

He has Dh350,000 in fixed-term offshore savings plans, which he currently tops up by Dh5,000 a month, but says he may have to close one of the plans for extra cash to live on and so he can continue paying off his Dh80,000 credit card bill. He is even considering stopping his Dh500-a-month critical illness cover.

He can, however, turn to his lender to ask for a payment holiday on his credit card payments, with banks offering breaks of between one and six months for those affected by the crisis.

To help himself, Daniel says he has cut back his spending, taking the time at home to batch-cook and freeze meal portions. Daniel estimates he is saving at least Dh200 a week on his usual Dh700 supermarket bill, as well as up to Dh800 a week on takeaways and coffees.

Updated: April 1, 2020 03:16 PM

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