ABU DHABI // If you're eating out today, check your bill. In most cases, the 10 per cent service charge should not be there.
A ban on service charges in non-tourist restaurants goes into effect today.
Restaurants in the capital said the Department of Economic Development (DED) had ordered the scrapping of the service charge at the beginning of January, with a month-long amnesty. Their time ran out yesterday.
"The Government gave us until the end of January. Tomorrow is the day. We have IT and accounting working on it as we speak," the manager of a restaurant in Abu Dhabi, who asked to remain anonymous, said yesterday.
She said the measure would probably be a net positive for staff. "As a manager, I feel that it's going to be a loss in revenue but the guest will be able to be more generous and the staff will receive more money."
Other eateries confirmed that they received the notices and planned to comply with the ruling by today, with one saying that a DED inspector gave the management the notice in person after asking whether they included service charges in their bills.
Fareed al Zubi, the chief lawyer at the department, said the amnesty was likely given to allow cafes and restaurants to adjust their billing procedures and software.
With the end of the amnesty, the Abu Dhabi branch of the DED was going to send out inspectors to make sure that restaurants were not defying the ban, he said, but also noted that tip-offs from customers were going to help determine which restaurants the inspectors target.
Al Safadi, a restaurant in Dubai that continues to levy a service charge, also said it had been sent a letter by the emirate's DED dated January 5 that gave them a month to remove the fee.
"They did this as if the service charge we take is an extra money that we charge the customer, so they considered it fraud, but this is actually from the cost of serving the customer," said Fadel al Safadi, one of the chain's managers.
Responses to the ban have been varied. Some restaurants have kept service charges on the bill for the time being. Others have raised their menu prices to compensate for the lack of a service charge, and some have simply removed the charge, which has never been legal, except at tourist restaurants.
Managers whose restaurants have not been levying a service fee questioned the need for the additional charge, claiming that the money rarely makes it into the hands of waiters.
"We consider it in the customer's right whether to pay or not," said Samir Abchee, the operations manager of Kabab-ji Restaurant in Dubai. "If you have all the costs of food on the bill I don't see why you should charge extra."
"I've been in the business for 10 years and if it's in the bill, it goes to the restaurant" instead of staff, he said.
Sven Mostegl, a food and catering consultant based in Abu Dhabi, said restaurants were not likely to comply unless they faced punitive measures. Mr al Zubi said these would include fines as well as closures for repeat offenders.
In late December, Sultan bin Saeed al Mansouri, the Minister of Economy, declared service charges a violation of consumer protection laws.
Service charges are proscribed by law for restaurants with tourist licences, usually found at hotels or tourist attractions. The maximum allowed service charge is 10 per cent.
A fifth of service charge revenue must go directly to staff, but most restaurants that have been illegally levying the charge on customers did not pass on any of the money to waiters, which has outraged many customers.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
COMPANY PROFILE
Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed
