Dubai Computer Group (DCG) has seen an 85% decrease in IT industry revenues in April due to coronavirus pandemic and the lockdown.
DCG is a non-profit organisation, with about 200 members, formed under Dubai Chamber of Commerce and Industry (DCCI) to represent the interests of the computer industry in Dubai and compromises IT distributors, resellers, system integrators, software and networking companies.
“March sales have grown threefold to fourfold in certain categories but due to the restrictions in last-mile delivery and zero exports in April, the industry, in general, has seen a plunge in revenues compared to January and February. It is not only from the customer side but also on the supply side. A lot of logistics issues are there and a lot of products are not available,” Dharmendra Sawlani, President of DCG and founder of Smile Computers LLC, told TechRadar Middle East, said.
Even though production has started in China, he said that supply is only back to about 60% in Dubai but the real challenge is last-mile delivery.
“Government and corporate sectors don’t buy from online and it is difficult to deliver. Government sectors are buying IT products even during the lockdown and lot of tenders is being invited on business-to-business e-marketplace - Tejari - every day,” he said.
Moreover, he said that Dubai is mainly dependent on exports and people are not receiving payments from customers due to lockdown. So, he said that payments are blocked and inventory is sitting inside the shop and resellers are not able to make payments to the distributors and they, in turn, are not able to pay the manufactures.
“So, the entire supply chain has come to a halt. We are talks with the government on stimulus packages but it can come in two ways, one is more orders and faster payments from the government and the other are stimulus through banks.
“Looking at the size of the economy and the players we have, there will be a situation where they [banks] will have to filter out good [companies] from the bad. Filtration will happen after the Covid-19 situation and there will be a lot of renegotiation in contracts with the banks and the vendors,” he said.
Cash flow constraints
Sawlani does not see a lot of closure of businesses due to Covid but a delay in payments is likely to happen as there is a lot of pressure on SMEs in terms of cash flow and the group is in touch with credit insurance companies, banks and is also in touch with distributors to ease the cash flow situation.
“Banks have no choice but to support the SMEs and that is where stimulus packages come into play. Banks are allowed to raise cash reserve ratios. I feel the lockdown should end by the end of this month and due to the kind of restrictions we have in Dubai, we should be back soon compared to many other countries. The number of cases in UAE is not high,” he said.
Ashish Panjabi, COO at Jacky’s Electronics and Jacky’s Business Solutions and board member of DCG, said that there is an issue of cash flow and the group is in talks with authorities such as DCCI and Dubai Economic Department to defer VAT payments for some time, otherwise the sellers have to pay a hefty fine for late payment.
“We are trying to work out what can be done in cooperation with authorities. Government has been extremely responsive and they are also getting our feedback about the industry. DCCI has helped us coordinate with other government departments wherever necessary or find resolutions to the challenges we faced. It encourages us to know that we can reach out to them any time of day or week,” he said.
Suchit Kumar, Vice-President of DCG, said that letters have been issued to the landlords requesting for rental reduction, a rent holiday and even deferrals and some landlords have been very supportive while talks with other landlords are ongoing.