Coronavirus in KuwaitKuwait

Kuwait small business owners hit hard by pandemic, face bankruptcy

KUWAIT: This file photo shows empty streets in Kuwait City during curfew hours. – Photo by Yasser Al-Zayyat

By Nawara Fattahova

KUWAIT: The coronavirus crisis has hit almost all businesses in Kuwait and the entire world. But small businesses have been the most affected, as for most entrepreneurs it’s the only source of livelihood, and most of them will not be able to survive several months of closure. Some businesses are able to somehow operate partially with online or delivery services, but many other businesses don’t have this service or they’re not allowed to provide deliveries if their activities are banned by the government during the coronavirus shutdown.

Kuwait Times interviewed owners of two small businesses that were subject to complete closure, as their services cannot be delivered. Fatma Offtada, owner of By Offtada beauty salon in Sabah Al-Salem, shut her salon in early March due to the government decision. According to this decision, she is also not allowed to provide home services. Fatma launched her business less than three years ago. She took a loan of KD 25,000, which has not been repaid yet.

“I have four employees working in my small salon. As I had to close the salon, and don’t have another source of income, I could only pay the staff half of their salaries. I don’t have any revenues, but they also have to receive something to survive. I will pay them the rest of the salary after we open the salon again,” she told Kuwait Times.

“Also, the landlord didn’t inform me of any rent relief, although the salon only operated for a few days in March. After I wrote a letter to him explaining the situation, he agreed to waive the rent for April. But if this situation goes on longer, I won’t be able to survive and will have to wind up my business. My business is still new and I haven’t finished repaying the loan and haven’t made any profits yet. I told the staff if any of them wants to leave, she can do so, but the problem is that there are no other salons open,” Fatma said.

Losing clients
Abdullah Al-Hilal, Director, Business Development at Magic Mind Media and Production, spoke about the closure of his business. “I established my business in 2016, and the company began operations in 2017. We currently have seven employees. We are gradually losing our clients – our two biggest clients were the first to stop all work until further notice.

One is a government entity that went into emergency mode and the other is a local company that had an event during Ramadan that we were organizing. The travel and tourism was the first to be affected by the outbreak and was hit hard with booking cancelations reaching 90 percent, and we lost some clients. The rest of the clients followed them in March as the pandemic became more serious,” he explained.

“We do have the luxury to work from home or online, but it mainly depends on the client. Nevertheless, part of our work is event management and right before the pandemic, we were finalizing two events – one before Ramadan and the other during the holy month,” Hilal said.

“Aside from the travel and tourism sector which was the first to be affected by the pandemic, restrictions that were imposed forced our clients to close their stores, thus leaving us without any business. For example, we have clients in the health sector, like dental and beauty clinics, as well as in automotive repair and beauty salons,” he added.

Hilal believes that at this rate, they can survive for a month, but not more. “We have suppliers in various countries, and some of them have not deferred their payments. The initial losses of the company go back to the monthly agreements that stopped. This can easily be calculated. Then there’s the extra work that we do for clients.

For example, we manage a social media account for a dental clinic. Every month, we perform tasks for the client that we receive fees to do, like managing a digital campaign. This is the same client that was supposed to have an event in the second week of April. This is where the calculation becomes harder,” he said.

“April’s losses have surpassed KD 35,000, while May looks likely to be slower, depending on the monthly agreements and new tasks. As an advertising services company, we approach new clients regularly when possible and taking new clients on board is a lengthy process.

This was also affected in the early stages of the pandemic. Monetarily, on a monthly average we can say we are losing between KD 10,000 to 15,000 just on our daily services, not counting the products that we import from different countries upon finalizing a deal with both the government and the private sectors,” Hilal told Kuwait Times.

Govt measures
The measures by the government are correct, even though they will last much longer than expected. “We have always stayed away from loans for various reasons. However, now because of the current situation, we will be forced to take a loan under specific conditions. As per my experience in the banking field, a commercial loan that will be provided through a bank will go through many stages before approval and will only pressure the company in the future.

In this state of emergency, the better solution is to provide grants. Grants are treated in a different way than commercial loans and that is what the rest of the world is doing. Some countries are even making this a nonreturnable grant if it is used to pay salaries of employees,” Hilal said.

“Another issue that many companies will face including ours is the company papers. Before the pandemic, we were processing our papers at the ministry, as well as adding more staff to our team. The government should consider all cases and provide solutions that will help the companies and not hurt them. The biggest challenge is entering the market again and working with new clients after the pandemic,” he noted.

Hilal doesn’t think the market will ever be the same as it was. “The fear from the pandemic will still be there. We may regain our clients, but we have lost seasonal activities and a large portion of the yearly income. The travel and tourism industry will need another six months at least to recover. Some of our clients will have a hard time regaining the trust of customers, like the automotive industry. Others like health clinics will be fine, since their customers are very loyal,” he concluded.

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