AMEInfo‘ Hadi Khatib, business editor, in an exclusive article about how the GCC consulting market faces 6 key post-pandemic challenges elaborated on the consulting sector in the Gulf area of the MENA.
The consultancy business is directly or rather proportionately related to the construction sector that is predicted by GlobalData to recover in 2021 slowly but after contracting by 4.5% in 2020. The region ramping up vaccination programmes is optimistically forecast to recover with 1.9% in 2021 and 4.1% in 2022, by the same leading data and analytics company. So, let us hear Hadi’s thoughts.
The GCC consulting market faces 6 key post-pandemic challenges
After a 12% contraction last year, the GCC consultancy sector faces six challenges to continue leveraging the region’s aspirations for sustainable and profitable business and economic development
The standout performer in 2020 was healthcare, seeing exceptional growth of more than 19%
GCC’s largest consulting market, financial services, took a big hit in 2020, with revenues falling by $160 mn
A strong consulting market growth of approximately 17% across the GCC region forecasted in 2021
The GCC consulting market contracted for the first time in its history—down by just over 12% in 2020, with COVID-19 wiping out nearly $400 million in revenues. The market is now worth around $2.7 billion, a new report by Source Global Research revealed.
2020 saw nervous clients put consulting projects on hold, particularly in hard-hit industries, such as retail, hospitality, and aviation, but also mega projects such as NEOM, World Cup 2022, Qiddiya, and more.
AMEinfo interviewed Edward Haigh, Joint Managing Director at Source Global Research, to inquire about last year’s results and next year’s forecasts.
The discussion revealed six key areas consultants need to keep in mind to gradually recoup their losses and continue leveraging the region’s aspirations for sustainable and profitable business and economic development.
“Consultants will continue to play an important role helping clients in all sectors create greater efficiencies in their organizations, but the key for consultants today will be to re-engage and re-align with their clients in this new normal,” Haigh told AMEinfo.
Areas where COVID-19 boosted consultancies
The standout performer in 2020 was healthcare, seeing exceptional growth of more than 19%.
“So much of that initial surge and response to the pandemic has already happened, and as such consulting to the healthcare sector will slow down in 2021, but pick up again in 2022,” Haigh said. “Consultants will bring new solutions and world-class innovation and expertise to bear on the issues healthcare professionals are facing, particularly around engaging with patients, embedding technology in everything organizations do, and providing remote diagnosis and access to healthcare.”
The GCC consulting market also saw growth in the technology market segment in 2020, as the need to rapidly facilitate the shift to remote working drove strong demand of 5.2%.
Cybersecurity services performed particularly well as companies sought to secure remote work, driving growth of 11.4% last year. Source Global Research expects the cybersecurity consulting market to grow a further 30% in 2021, taking total revenues to $236 mn.
While the GCC’s largest consulting market, financial services, took a big hit in 2020, with revenues falling by $160 mn, Source Global Research expects consultants working in this sector to regain their losses in 2021, as banks push forward with ambitious digital transformation projects, spurred on by both customers embracing digital banking and the competitive threat from fintechs.
Consulting bounce back: Forecasts for 2021
Source Global Research is forecasting strong consulting market growth of approximately 17% across the GCC region in 2021.
Some 63% of organizations in the GCC say their use of consulting support will increase over the next 18 months, with an especially strong interest in the energy & resources, technology, media & telecoms, and manufacturing sectors. Healthcare will prove to be an important sector for consultancies as well.
“The current underpinning the GCC healthcare market today is the creation of a state of the art, forward-looking, citizen-centric, healthcare system fit for its time. There is far less legacy that’s being carried forward if we are to compare the GCC with markets such as the US or UK,” Haigh explained. “This presents a far greater opportunity to create a future healthcare system from scratch, and a greater opportunity for consultants to provide support, too.”
6 challenges facing GCC consultancies
1- Consultancy fee rates
Around 44% of clients expect consultants to cut their fees this year, with 13% expecting the cuts to be steep, in contrast to pre-pandemic expectations that 84% of GCC clients expected rates to rise.
The reason provided was that 55% of clients said they believe many firms are qualified to perform the work that needs to be done, driving down rates.
Haigh said: “Given the ongoing pandemic and its deleterious effect on the consulting market last year, one might well expect consulting fees to suffer over the next 18 months.”
2- Freedom of movement
“The GCC’s consulting market arguably relies on two things more than anything else: freedom of movement for consultants and reliably high oil prices.”
While oil prices suffered during the pandemic with average closing prices of $40, 20% less than 2019, oil has rebounded in 2021 and is currently flirting with $65 going to $70, spelling relief for consultancies.
“Access to Qatar has, historically, not been easy and only those who had previously established presence in the country were able to operate there, but enough work exists in other parts of the region— Saudi and the UAE for example—and so attention shifted elsewhere,” Haigh said.
“But to some extent, the events over the past 12 months have helped find a solution to that. For many, instead of having to be on-site, remote consulting proved it matters less whether someone is based in Riyadh or Dubai,” Haigh revealed. “The really exciting opportunity for leaders in Saudi, UAE, and other GCC countries is that this provides access to consultants wherever they are in the world, not just in the region.”
3- Geopolitics and reputational risks
Geopolitics and reputational risk weigh very significantly on the minds of consultancies, according to Haigh.
“The risks are prevalent in the GCC more than anywhere else. They have the potential to cause dramatic changes in consultants’ businesses, whether that’s a market shutting down suddenly, the taps being turned off, or a leader insisting on changing consultancies midstream,” explained Haigh.
“Consultants have helped clients identify some of the problems that they themselves are creating, but honestly, consultants are used to working in these fairly extreme conditions.”
Relative to other parts of the world, those with relationships tend to benefit more significantly in the GCC. In the early days, consultants had to invest a lot of time building those relationships with clients. Spending a year on building a personal and professional relationship before seeing anything in return is quite normal here.
5- Client ambitions
Haigh said consultants don’t mind their clients’ desire to get things done very quickly, but “Consulting firms tend to find themselves cast in the role of naysayers a bit.”
“They are often put in a position where they affirm their ability to perform the project at hand, but have to caution the client that it will take more time than originally allocated,” Haigh said.
“Based on their experience with other projects, consultants are always trying to insert more realistic time frames and find a way to harness and manage their clients’ ambitions and expectations.”
6- Talent allocation
UAE and Saudi have recently been involved in a tug of war to attract business, each easing regulatory frameworks and offering business incentives to pull SMEs, entrepreneurs, and large corporates over to their side.
“This is a healthy competition for supremacy on projects, and it has been a major driver of growth for consultancies for a number of years,” Haigh explained.
“But, I think what is less clear, is how this will impact the market in terms of supply. Saudi is the largest consulting market, but UAE is where most of the consultants are based. And moving consultants between those two countries has been an enormously challenging thing,” Haigh indicated.
Haigh added that there is a real supply issue for consultants across the region, not just in terms of keeping up with demand, but also figuring out who to put where.
“Making sure that the expertise is available on both sides was made all the more challenging with physical restrictions on talent getting into the country, or talent themselves preferring to work in and from the UAE, instead of more restrictive areas,” said Haigh. “Localization efforts in many GCC countries has exacerbated supply challenges.”
Anirban Bagchi Posted on October 21, 2020 in MEConstruction News that Euro Auctions reports rise in lot prices, bidders and online bids at September Dubai sale. What is the meaning of such a movement? Anirban Bagchi explains.
Internet buyers double in number as average lot prices go up 63% while first time bidders grow exponentially
Euro Auctions has reported a year-on-year increase of 63% in average lot prices at its September sale in Dubai while first-time bidder registrations rose by nearly 300%, with 20% of the new bidders placing successful winning bids.
The global machinery auctioneers said the results prove that there “is an appetite for good used equipment in the region” and that Euro Auctions is “fast becoming the auction of choice for buyers and sellers in the Middle East for the disposal of stock to a true international audience”.
According to Euro Auctions the Dubai sale on September 28th attracted increased number of bidders, doubling the number of internet buyers, and also increasing the number of UAE vendors. The one-day sale resulted in 33% of all bids being transacted online proving the success of the marketing reach for this sale.
Bidders for the sale came from 65 countries, of which, 21 countries successfully bought on the day. Online bids came from 19 countries around the globe, with the top bidding countries being the UAE, Saudi Arabia, the Netherlands, the UK and Africa countries as a whole.
Derek Bleakly, general manager of Euro Auctions, Dubai, said: “Euro Auctions has been working hard with consignors across the Middle East over the last three years to build awareness and trust, demonstrating that our auctions are the place to bring good equipment, which in the Gulf, is in high demand. Plant and machinery auctions are no longer seen as the place to dump old, poor quality, low-spec machinery. Quite the reverse in fact, with many rental companies sending entire fleets of good, well-maintained two- to three-year-old machines to auction, making ideal purchases for dealers, contractors, and civil engineering companies.
“In last 12 months since mid-2019, there has been a marked uptake in the Middle East market for good machinery and equipment. Contractors and rental companies in the Middle East have been buying relatively low levels of new machines for the last 4-5 years and, as a result, stocks of plant are aging. Not buying through dealerships, buyers have turned to auctions for good late-year machines as well as new unused stock.”
Euro Auctions added that now with Covid-19 affecting the global economy, the used equipment market could well boom in the next 12 months. The auctioneer projected that with major OEMs pausing production globally, as happened in 2008, it is likely that when demand increases, OEMs will be unable to accelerate production, fuelling a demand for good, late, low-hours equipment. Euro Auctions has several other sale events around the world for the remainder of this year, including another in Dubai on December 14th.
The sponge-inspired lattice resisted buckling longer than any other structure.
The next generation of skyscrapers could be, well, spongey. Researchers at Harvard University’s Wyss Institute for Biologically Inspired Engineering and John A. Paulson School of Engineering and Applied Sciences say a lattice reinforced with diagonals, inspired by the structures built by sponges, could mean lighter, but stronger skyscrapers and bridges.
Sponges are wild. They’re not just alive—they’re resilient predators that reproduce sexually, despite having no organs or tissues or even a traditional “inside” of their body structures. In a way, they’re living structures already, and their sturdiness is what helps them survive.
“The predominantly deep-sea hexactinellid sponges are known for their ability to construct remarkably complex skeletons from amorphous hydrated silica. The skeletal system of one such species of sponge, Euplectella aspergillum, consists of a square-grid-like architecture overlaid with a double set of diagonal bracings, creating a chequerboard-like pattern of open and closed cells.”
Beginning with this structure as a guide, the scientists built a 3D physics model and put the sponge and a selection of other traditional building types through the ringer. “[U]sing a combination of finite element simulations and mechanical tests on 3D-printed specimens of different lattice geometries, we show that the sponge’s diagonal reinforcement strategy achieves the highest buckling resistance for a given amount of material,” they conclude.
Existing things use both square and diagonal lattices depending on the item. If you’ve owned enough plastic milk crates in your life, you’ve likely seen both structures just in those designs.ADVERTISEMENT – CONTINUE READING BELOWhttps://dc349419a6f5a80cdd0dfe662fdc99d4.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.htmlhttps://dc349419a6f5a80cdd0dfe662fdc99d4.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html
Composite rendering that transitions from a glassy sponge skeleton on the left to a welded rebar-based lattice on the right. PETER ALLEN, RYAN ALLEN, AND JAMES C. WEAVER/HARVARD SEAS
But the sponge-inspired lattice is double layered, resulting in something more like a basket weave you may have seen on the seat of a wooden chair. By testing the structural strength of the sponge, researchers have combined the best of building with the best of weaving, in a way.
The most important takeaway, they say, could be to build the same strength and size of building, but with less building materials. They could also just broadly improve the materials used for less optimal designs, especially in infrastructure like bridges. The scientists explain:
“Our results demonstrate that lessons learned from the study of sponge skeletal systems can be exploited for the realization of square lattice geometries that are geometrically optimized to avoid global structural buckling, with implications for improved material use in modern infrastructural applications.”
Posted in Construction, on July 5, 2020, Further cuts to MENA construction sector expected for 2020 as the region appearing to be hit with a triple whammy, per GlobalData, would sound in our opinion as a realistic assessment at this conjecture of the construction industry in the MENA.
The Middle East and North Africa (MENA) construction sector is expected to be bit by the triple whammy of lower oil production, low oil prices and contracting non-oil sectors. Leading data and analytics company GlobalData has further cut its construction output growth forecast for the region for 2020 to -2.4%, down from the previous forecast of 1.4%, in light of continued spread of COVID-19.
Yasmine Ghozzi, Economist at GlobalData, comments: “Construction activity for the remainder of 2020 is set to see poor performance. While there is usually weak construction activity in the holy month of Ramadan and during the hot summer months of June, July and August, this is usually compensated by strong performance at the beginning and end of the year. However, this will not be the case this year due to the strict lockdown policies that extended until the end of May.
“The sector is expected to face headwinds in 2021 with a slow recovery, but the pace of this will be uneven across countries in the region. Fiscal deficits and public debt levels will be substantially higher in 2021. Fiscal consolidation will hinder non-oil growth across the region, where governments still play a considerable role in spurring domestic demand.
“In addition, public investment is likely to be moderate, which will translate into fewer prospects for private sector businesses to grow – especially within sectors such as infrastructure. Expected increase in taxes, selected subsidy cuts and the introduction of several public sector service charges will influence households’ purchasing power, having a knock-on effect on future commercial investments.”
Amid the worsening situation with regards to the COVID-19 outbreak and the decline in oil prices, GlobalData has further cut its forecast for construction output growth in Saudi Arabia to -1.8% from its previous forecast of 2.9% in 2020 and expects a recovery in the sector of 3.3% in 2021. The government’s decision to host limited annual ten-day Hajj entails a possible loss of estimated revenue at more than US$10bn, adding more pressure on the Kingdom’s economy.
Ghozzi adds: “GlobalData has estimated a contraction of 2.1% in construction output growth in the UAE but expects a rebound in 2021 of 3.1%. In one of the largest global energy infrastructure transactions, Abu Dhabi National Oil Company (ADNOC) raised US$10bn by leasing a 49% stake in its gas pipelines for 20 years. This landmark deal is important especially during the prevailing industry downturn in order to keep profitability.
“GlobalData has also cut further the growth rates for Qatar, Kuwait and Oman in 2020 to -3.4%, -7.8% and -8.1%, respectively. Qatar’s economy this year will be affected by decline in tourist arrivals, low consumer spending and low oil prices. Nevertheless, strong fiscal stimulus and spending on infrastructure projects should provide support.
“The negative outlook for Kuwait is weighed down by lower oil prices and the prospect of a higher fiscal deficit, possibly compromising the government’s capital spending on construction and infrastructure. Business unfriendliness constitutes a barrier to reforms in the Kuwaiti economy; the extensions in tenders’ deadlines compounded by an inflexible bureaucratic procurement setup that slows decision-making will delay progress for several Kuwaiti megaprojects.”
Egypt’s construction sector is set to continue performing well despite poor performance of the non-oil sector in April. GlobalData expects construction to grow at 7.7% in 2020, slowing from 9.5% in 2019, given a short-term slow down due to the pandemic and 8.9% in 2021, and to continue maintaining a positive trend throughout the forecast period. In the Arab Maghreb, GlobalData has further cut forecasts for construction growth in Tunisia, Morocco and Algeria to -3%, -2.1%, and -2.5%, respectively, in 2020 and 0.7%, 1.2% and 1.9%, respectively, in 2021.
GlobalData has a bleak view of Iran’s construction sector throughout the forecast period. A slowdown in economic activity caused by the virus outbreak and a possible wave of further US sanctions (in the event Trump wins a second term) will continue to wreak havoc on its economy, and drastically affecting construction activities.
GlobalData shares its forecasts for construction industries across the world in the midst of the coronavirus pandemic.
The revised and further-cut construction output growth forecast for the Middle East and North Africa (MENA) region for the year 2020 is -1.1%, down from the previous projection of -0.8% (as of mid-April) and 4.6% (Q4 2019 update) due to the soaring COVID-19 cases in the region, and the subsequent curfews and lockdown measures, according to GlobalData, a leading data and analytics company.
Yasmine Ghozzi, Economist at GlobalData, says: “The slump in oil prices will dent the sector’s growth. GlobalData expects cutbacks in spending and, in particular, cuts to capital spending on infrastructure, especially for oil and gas dependent countries given that investment plans were set on assumptions for oil at US$50 – US$80 per barrel. The IMF currently predicts that GDP growth in the MENA region will fall to – 3.3% in 2020 because of its exposure to lower oil prices and the extensive disruption in travel and tourism.”
Governments across the MENA region offered direct support to boost activity in construction and infrastructure. In the case of Egypt, for example, the government guided construction companies operating in public projects are set to resume work in full capacity by early April, following a period of two weeks of reduced business.
For Saudi Arabia, the biggest construction market in the region, the country’s finance minister announced plans to make deep cuts to public spending, so any further stimulus to the construction sector would rely on the amount of reserves the government is willing to draw upon, given the limit that lower oil prices have put on government revenues.
It remains to be seen whether governments in the region will lend direct support to companies facing acute financial pressure in the sector.
Ghozzi concludes: “In addition, construction, real estate, and oil and gas sectors are among the most exposed to the business risks created by COVID-19. Force majeure clauses in contracts are being more widely used by firms needing to scale back or rearrange their business plans amid the pandemic. The issue came under the spotlight when the Iraqi government announced the pandemic as an event of force majeure for all projects and contracts. Although construction sites are generally exempted from the lockdowns imposed in many countries in the MENA region, there is an expectation that legal claims, especially from contractors, will be filed citing the crisis as a justifiable reason for failure to deliver work on time.”
Originally posted on Pandaemonium: Josephine Baker poster This essay, on Josephine Baker, Éric Zemmour and universalism in French politics, was my Observer column this week. It was published on 5 December 2021, under the headline “How can a country that hails Josephine Baker take the racist Zemmour seriously?” “How does it feel to be a white man?”…
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