Is COVID-19-driven shift in MENA consumer behavior here to stay?

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According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025. AFP
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The shift in consumer habits is not the only change the region is experiencing. E-commerce growth has also accelerated the use of digital payments. (AFP)
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According to a Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025. AFP
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Women and children shop at a mall in the Saudi capital Riyadh. (AFP file photo)
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Updated 24 July 2021

Is COVID-19-driven shift in MENA consumer behavior here to stay?

  • Online shopping platforms have witnessed unprecedented growth since the onset of the pandemic
  • In the GCC alone, e-commerce grew from $5 billion in 2015 to about $24 billion in 2020

CAIRO: Businesses of all sizes may have been hit by pandemic lockdowns, but online shopping platforms have witnessed unprecedented growth in the region, with e-commerce growing from $5 billion in 2015 to about $24 billion in 2020 in the GCC alone, according to a Middle East report by global management consultancy Kearney.

“People who used to go to stores and supermarkets moved to buying from apps. They now see the convenience and experience the ease of online shopping,” said Fahim Al-Zubaidi, CEO and co-founder of Akshaak, an e-commerce platform aimed at home-based businesses and individual projects.

While this shift in behavior may have been heightened during lockdowns, Al-Zubaidi believes it is here to stay.

“People will not stop going to shopping malls, but some of the products, particularly groceries and electronics, will move from shops to e-commerce platforms,” he said. 




While people may not stop going to shopping malls, many people who have good experience shopping online during the pandemic may prefer continue doing that. (AFP)

Another person who expects this shift in consumer behavior to persist long after the pandemic ends is Mahdi Al-Olabi, founder and CEO of R2S, a tech company that provides logistic solutions for e-commerce firms in Egypt.

“During the months of the lockdown, we experienced a huge spike in business, about 40 percent to 60 percent increase in deliveries,” he said.

“We’ve seen a shift in consumer culture, particularly when it comes to buying electronics, grooming products and workout equipment. While the buying calmed down a bit after lockdown, there has been a significant consumer culture change to the concept of shopping online. I don’t think that is ever going to go away.”

These predictions seem to be in line with projected e-commerce growth trends in the Middle East. According to the Kearney Middle East report, MENA e-commerce is estimated to reach $50 billion by 2025.

However, the shift in consumer habits is not the only change the region is experiencing. E-commerce growth has also accelerated the use of digital payments. The Middle East, traditionally dominated by cash transactions, now has more online shoppers preferring to use digital payments, according to a study from London-based Checkout.com.

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$50 billion - Projected MENA e-commerce volume in 2025

The report reveals that 53 percent of the region’s consumers now most often use digital payments for their online purchases. Al-Olabi anticipates an even brighter future for e-commerce if this trend continues.

“Once people become comfortable using digital payments, it will be reflected in the growth of e-commerce,” he said. “They’re directly correlated. The more a country moves toward becoming a digital society, the more people will be apt to use e-commerce.”

Lydia Schoonderbeek, founder of Egypt-based beauty products e-tailer Source Beauty, said that although cash on delivery is still the preferred payment method for her customers, she sees an uptick in credit card transactions.

“Cash on delivery makes up 80 percent of our payments, but credit cards are slowly coming into the spectrum,” she said. “In one particular month, it was up to about 30 percent. People are starting to feel more confident not dealing with cash.”

While e-commerce may be growing in the region, the industry still has some catching up to do. According to Schoonderbeek, online payment systems need to be more user-friendly.

“Sometimes you’re asked to put an OTP code, and if you get preoccupied with something and don’t put the code in on time, you have to start the whole shopping experience again. The likelihood of you abandoning that whole experience is high. This needs to be fine-tuned.”

Providing the option to pay in instalments is another feature that should be made available to online shoppers, Schoonderbeek says. “People are price-sensitive; they should have the option of paying in instalments. This is not here yet, maybe because e-commerce in Egypt is still very much in its infancy.”

Meanwhile, Al-Zubaidi is concerned that the rapid growth of e-commerce in the region will affect service quality.

“With an increased number of e-commerce sites, we will have an issue with quality. Now everyone wants to open an e-commerce site. They think they will be successful, but they’re just copying other e-commerce startups. If they don’t have the right strategy, they will close down.”

However, he is optimistic about the future, adding: “It will take time, but the market will clean itself.”


France’s OVHCloud takes first step toward IPO and hopes to raise around $470m

Updated 53 sec ago

France’s OVHCloud takes first step toward IPO and hopes to raise around $470m

PARIS: French cloud computing services provider OVHcloud said it was hoping to raise 400 million euros ($468.64 million) via the issuance of new shares as part of a planned initial public offering (IPO) on the Paris stock market.
OVHCloud hopes the IPO will “accelerate its growth trajectory and consolidate its European leadership position while continuing to expand in North America and Asia,” the company said, as it released its IPO registration document.
The family-owned company added on Monday that it was targeting a revenue growth of 10-15 percent for 2022 and an organic revenue growth rate in the mid-twenties by 2025.
These growth targets would be achieved while maintaining an adjusted EBITDA (earnings before interest, tax, depreciation and amortization) margin in line with the fiscal 2020 level.
No dividend payments were anticipated in the mid-term with cash-flows expected to be re-invested in line with the company’s accelerating growth trajectory, it added.
Following the IPO, the Klaba family will retain a substantial majority stake in OVHcloud.
The company had initially announced its IPO plans in March, two days before a major blaze destroyed one of its data centers in eastern France — a disaster that had raised concerns about its capacity to go public.
In June, OVHCloud re-committed to an IPO but provided no timetable.

ACWA Power bets big on Uzbekistan growth

Updated 19 September 2021

ACWA Power bets big on Uzbekistan growth

  • ACWA has invested about $1.2 billion in Uzbekistan thus far
  • ACWA plans to contribute to $100 million Uzbekistan fund

MOSCOW/RIYADH: In the crowded corridors of the Hilton Tashkent City, ACWA Power Chairman Mohammad Abunayyan talks quietly with key delegates of the Islamic Development Bank’s annual meeting in Uzbekistan, who approach him one after another.

Abunayyan, a lean, middle-aged, intelligent-looking man is celebrating with the bank's officials the launch of the $100 million Economic Empowerment Fund for Uzbekistan earlier this month. 

ACWA Power is planning on becoming one of the Saudi investors that will make up 45 percent of the fund, which is also being financed with money from the Islamic Development Bank and the Uzbek government.

ACWA’s contribution would be the latest in a long line of investments in the Central Asian nation, where the utility now has assets worth $4.6 billion having invested about $1.2 billion, according to the prospectus for its initial public offering that was launched earlier this month.

Although that is less than one tenth of the SR248 billion ($66 billion) of assets ACWA has accumulated globally since it was established in 2004 with what Abunayaan describes as a small equity investment. Abunayaan joined the board in 2008.



Beyond its home market in Saudi Arabia, ACWA also owns assets in Oman, UAE, Bahrain and Jordan.

Still, Uzbekistan is an important market for ACWA Power.

In 2020, the company was awarded three projects: Sirdarya Combined-Cycle Gas Turbine (CCGT) independent power producer (IPP) with 1,500 MW of gross contracted power capacity; the 500 MW Bash Wind IPP; and the 500 MW Dzhankeldy Wind IPP.

The company’s fourth and largest Uzbek asset in Uzbekistan is the Karakalpakstan 1,500 MW Wind IPP project, valued at $2 billion. The Karakalpakstan, Bash and Dzhankeldy projects are at advanced stages of development and Sirdarya IPP is under construction.



ACWA Power’s investments in Uzbekistan represent a sizeable chunk of total foreign direct investment (FDI) that the country has received in recent years.

“Uzbekistan attracted $2 billion in FDI in 2020 and targets another $5 billion this year,” Atabek Nazirov, director general of the Direct Investment Fund of Uzbekistan, told Arab News on the sidelines of the IDB’s two-day conference on Sept. 3.

Such investments mean a long-term relationship between ACWA Power and Uzbekistan.

“[In our projects] we need to lay the foundation for a long-term partnership, this is a relationship that lasts for 20, 25, 30 years,” Tom Teerlynck, executive vice president of ACWA Power, said during a panel discussion organized by the Islamic Corporation for Insurance of Investments and Export Credits.

“The early years go very smoothly because everybody is happy — agreements signed, infrastructure is being built, the services being provided,” he said. “But problems come in later when people in ministries or private companies change. So, it’s very important to lay very robust foundations.”

Uzbekistan officials are confident that ongoing reforms will propel economic growth, despite the global shock caused by COVID-19.

“In 2020, Uzbekistan was the only economy in the Central Asia region that did not have a negative gross domestic product [GDP],” said Direct Investment Fund of Uzbekistan’s Nazirov. “We were able to achieve just above 1 percent growth.”

The government is forecasting economic growth of 6.5 percent this year although that is a conservative scenario and it is hoping for closer to 7 percent, Ilhom Norkulov, Uzbekistan’s deputy minister of economic development and poverty reduction, told Arab News at the IDB meeting.

“For the next five years our target is to increase GDP to $100 billion so we are working to create conditions for the economy to grow 6-7 percent a year,” he said.

However, Uzbekistan’s economy is facing tailwinds in the form of a high inflation rate – expected at 10-11 percent this year – unemployment of 10.5 percent in 2020 (up from 5.8 percent in 2017) and a decline in average monthly wages to a low of $226 in the fourth quarter of 2018 from a peak of $415 in 2016, but back to $280 in the second quarter 2021, according to official data.

Government officials say they are fully aware of the issues, and maintaining economic reforms and income growth should ease the employment and wage conditions over the long run.


Lebanon’s soaring inflation led by 250 percent jump in fuel costs amid currency slump

Updated 18 September 2021

Lebanon’s soaring inflation led by 250 percent jump in fuel costs amid currency slump

  • Lebanese CPI jumped 123 percent in the year to July 2021
  • Food and non-alcoholic beverages prices rose 248 percent

DUBAI: Lebanese residents were forced to pay more than double for consumer goods in July compared with a year earlier as prices soared amid a partial lifting of fuel subsidies and a record plunge in the local currency.

The latest data from Lebanon’s Central Administration of Statistics shows the consumer price index leaped 123 percent year-on-year last month as officials struggled to contain an economic meltdown the likes of which have not been seen since the end of the country’s 1975-1990 civil war.

The biggest contributor to surging prices has been the cost of transportation, which soared by 253 percent from July 2020, reflecting the rise in fuel costs after the previous government priced gasoline at the exchange rate of 3,900 pounds to the dollar in June. Two months later, the central bank began providing fuel importers with dollars at an exchange rate of 8,000 pounds to the dollar.

The Lebanese pound has been officially pegged at 1,507.5 pounds to the dollar since 1997, but is worth a lot less on the black market. Following the resignation of former Prime Minister-Designate Saad Hariri in July, it plummeted to a record 24,000 per dollar.

This pushed prices of food and non-alcoholic beverages up by 248 percent in the year to July 2021, while health care services rose by 178 percent. Prices at restaurants and hotels grew 246 percent and clothing and footwear prices almost doubled.

The formation of Najib Mikati’s government last week, following a 13-month political vacuum, provided Lebanese with slight reprieve.

The pound stabilized at around 14,000 to the dollar on Thursday amid the new government’s pledges for reforms and a resumption of talks with the International Monetary Fund (IMF) which had hit a dead-end following bickering over the size of the banking sector’s losses.

Reforms demanded by the international community include a forensic audit of the central bank’s accounts and a restructuring of the banking sector.

On Thursday, a meeting took place at the Economy Ministry with the president of the syndicate of supermarket owners and the president of the syndicate of food importers to discuss lowering the prices of goods.

The meeting touched on a new pricing mechanism for goods in the wake of the Lebanese pound’s surge, with new economy minister Amine Salam saying that ” both unions have committed to start reducing the prices of commodities.”

“The ministry will not tolerate this issue and will be strict in monitoring price,” he said.


Saudi mining law will attract ‘incredible’ private investment to $1.3 trillion sector: Golden Compass CEO

Updated 19 September 2021

Saudi mining law will attract ‘incredible’ private investment to $1.3 trillion sector: Golden Compass CEO

  • The Saudi Industrial Development Fund is also offering 60 percent loans to investors in a bid to attract global players into the Kingdom
  • Alcoa Group, The Mosaic Co. and Barrick Gold have invested in the Kingdom's mining sector

RIYADH: Saudi Arabia’s new mining law will attract private investment from home and abroad as the Kingdom looks to exploit an estimated $1.3 trillion of potential value in the sector, according to Meshary Al-Ali, founder and CEO of mining consultancy Golden Compass.

In January, the Kingdom moved to capitalize on the vast wealth hidden below ground in Saudi Arabia with the establishment of a mining fund and support for geological surveys and exploration program activities.

The Saudi Industrial Development Fund is also offering 60 percent loans to investors in a bid to attract global players into the Kingdom, while the Ministry of Industry and Mineral Resources is investing $3.7 billion in the sector.

The deputy minister of Industry and Mineral Resources Khaled Al-Mudaifer talked up the potential riches beneath the Kingdom’s soil last month, telling CNBC that studies have estimated $1.3 trillion in reserves of phosphates, gold, copper, zinc, nickel, rare earth metals and other minerals.

Speaking to Arab News, Al-Ali was confident the Kingdom’s enthusiasm for the sector would attract worldwide attention.

FASTFACTS

Studies have estimated $1.3 trillion in reserves of phosphates, gold, copper, zinc, nickel, rare earth metals and other minerals in Saudi Arabia.

The Saudi Geological Survey has announced 54 locations for exploration, with more to be revealed soon.

The Kingdom has already attracted major international investors.

“It’s a very flexible and very transparent system, and it’s one of the most powerful in mining around the world,” Al-Ali said. “The system is new and it can encourage investors to come to Saudi Arabia.”

Under Vision 2030, mining is the third pillar of Saudi Arabia’s economic development, after energy and petrochemicals, as it aims to diversify the country’s economy away from dependency on oil.

The Saudi Geological Survey has announced 54 locations for exploration, with more to be revealed in the coming months that will be auctioned to investors.

The National Geological Database is being created to allow investors to find the locations of mineral deposits in a bid to increase the transparency and competitiveness of the sector in Saudi Arabia.

The Kingdom has already attracted major international investors, including US firm Alcoa Corp., which has a 25.1 percent stake in Ma’aden Bauxite and Alumina Co., and Ma’aden Aluminium Co., as part of $10.8 billion joint venture with Saudi miner Ma’aden, located in Ras Al-Khair Industrial City in the eastern province.

Fertilizer producer The Mosaic Co., another US company, has a 25 percent stake in the $8 billion Ma’aden Wa’ad Al-Shamal Fertilizer Production Complex located in Wa’ad Al-Shamal Minerals Industrial City in the northern province of Saud Arabia.

Canada’s Barrick Gold Corp. has a 50 percent stake with Ma’aden in the Jabal Sayid underground copper mine and plant.

“The private sector contribution will be incredible within the next couple of years,” said Al-Ali.

The mining sector is expected to create thousands of jobs in the Kingdom in the coming years with the goal of 256,000 geologists, engineers and others by 2030, he said.

“The ambitions will be reflected in a doubling of the sector’s contribution to GDP,” said Al-Ali.

“The income for the mining sector was above SR96 billion ($26 billion) in 2020 and we are targeting SR176 billion by 2030.”


Saudi military industry delegation meets investors in London defense show

Updated 17 September 2021

Saudi military industry delegation meets investors in London defense show

  • Officials from Saudi Arabia’s General Authority for Military Industries (GAMI) and Saudi Arabian Military Industries (SAMI) met with a number of major international investors in the fields of defense and military security

RIYADH: Saudi Arabia’s military industry delegation concluded on Friday its participation in the four-day Defense and Security Equipment International (DSEI) trade fair held at the ExCel Center in London with meetings with investors.

Officials from Saudi Arabia’s General Authority for Military Industries (GAMI) and Saudi Arabian Military Industries (SAMI) met with a number of major international investors in the fields of defense and military security from the United Kingdom and European countries, as well as a number of people from other countries interested in the defense and security military industries sector, GAMI said in a statement.

These meetings were attended GAMI Governor Eng. Ahmed bin Abdulaziz Al-Ohali, GAMI’s partners in the sector, as well as Saudi and British officials and stakeholders from the industry and investment sectors.

The UK Minister of defense Ben Wallace and a number of official delegations at the regional and international levels also inspected the Saudi pavilion, learning about the key targets of the military industry sector in the Kingdom, its promising investment opportunities and the pursuit of GAMI to reflect the ambitious vision of the wise leadership aiming at the Saudization of more than 50 percent of spending on military equipment and services by 2030.

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