SA hit by Dubai crash

2009-11-28 09:56

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 $60-billion (about R445-billion) 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.


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.


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.


“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 $800-billion 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 R7 billion from Trans­net in 2007, had planned to give it a

$1-billion 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.

 

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