Dubai crisis hurts SA expats
Nov 29 2009 08:49
Andile Ntingi
Johannesburg - Some of the nearly 40 000 South Africans lured by high pay and low taxes to Dubai could be forced to make a speedy retreat.
This is after news of the financial woes at Dubai World, the firm that rocked the global financial markets late this week, spread panic across the world's stock markets.
World markets were still reeling on Friday after the government of Dubai said that its cash-strapped crown jewel, Dubai World, would suspend the repayment of its $60bn (about R445bn) debt for six months.
Explosive growth over the past few years in Dubai, a booming city on the shores of the Gulf, had turned it into a happy hunting ground for South African construction companies and expatriates.
Cancelled contracts
But the global economic recession has resulted in an increase in job cuts and the big South African construction firm Murray & Roberts has already seen some of its contracts cancelled.
"There is an increase in retrenchments in Dubai across the board. We are already seeing a trend in expatriates returning to their home countries because of retrenchments," said Abdullah Varachia, a senior manager at research firm Frontier Advisory.
He said the restructuring of Dubai World and its businesses, including property subsidiary Nakheel, could lead to further job cuts.
In November last year Nakheel retrenched 500 employees, about 15% of its labour force.
Murray & Roberts spokesperson Eduard Jardim said despite Dubai's financial difficulties, the construction company had a "strong pipeline" of tenders for mega projects elsewhere in the Middle East.
"There is a strong pipeline and steady supply of tenders for mega projects in the region, particularly in Abu Dhabi and Saudi Arabia. These markets are expected to remain buoyant, supporting planned growth over the next three years," Jardim said.
Trump Tower project
He said the only project on which Murray & Roberts was contracted to Dubai's Nakheel group was the Trump Tower project, which would have resulted in the construction of a mega international hotel and a sky-breaking tower site.
Work on the Trump Tower was halted in June.
"This contract was terminated and all accounts settled in full in the previous financial year," Jardim said.
On Friday the JSE-listed Murray & Roberts said its joint-venture partners in the HMRT consortium were confident that they were going to be paid for the work they had done on the Dubai International Airport.
"While progress remains slow, the HMRT joint venture is confident of its rights under the contract and will pursue such rights as appropriate," it said.
Mike Upton, the chief executive of South African construction firm Group Five, said the company had limited exposure to Dubai's property market.
"We don't have an undue exposure to Dubai and it is a small part of our business. Most of it is outside Dubai, in Abu Dhabi and Jordan. In the Middle East we focus on heavy infrastructure and not property development," he said.
Standard Bank's chief economist, Goolam Ballim, said the temporary debt default by Dubai World had exposed how fragile the world economic recovery was.
Pockets of deep fragility
"Dubai is a reminder that there still exists pockets of deep fragility in the global economy, which may compromise growth in either nations or regions," he said.
There was speculation that the city state of Abu Dhabi, which controls an $800bn sovereign fund, could come to the rescue of the struggling Dubai empire. But at this stage Dubai seemed destined for more trouble as the city's property prices are expected to drop 25% in the next six months.
Property prices have already sunk 50% in the last year. Even the South African operations of Dubai World do not appear safe.
The owners of the V&A Waterfront, which bought the iconic tourist magnet for R7bn from Transnet in 2007, had planned to give it a $1bn facelift ahead of the 2010 Fifa World Cup.
But Varachia said the expansion at the V&A Waterfront, which attracts more than 22 million people a year, was in jeopardy.
"That is not going to go ahead now. It will have to wait for six months until the restructuring of Dubai World's businesses is completed," he said.
- City Press
