“Africa is on the radar screen of a lot of the countries in the Middle East,” notes Rassem Zok, CEO, Standard Bank Plc, MENA. “Africa is regarded by many developed economies as one of the final remaining frontier markets with significant opportunities … and the GCC countries are very aware of this.”
The EIU study, entitled GCC Trade and Investment Flows, explores the economic ties of the GCC – which comprise Bahrain, Kuwait, Oman,Qatar, Saudi Arabia, and the United Arab Emirates – with each world region and identifies major growth drivers.
Key findings from the study show the GCC’s push into Africa is broadening by sector and geographical location, especially in telecommunications and private equity in West Africa, as well as energy projects in South Africa and Mozambique, which show diversifying investment flows.
According to World Bank estimates, $96 billion a year is
required to bridge the infrastructure gap on the continent; opportunities presented by this gap is a primary growth driver. Fast Moving Consumer Goods (FMCG) is one of the fastest-emerging opportunities on the continent, driven by increased spending power and rising consumer needs, the study showed.
GCC-Africa deals in 2014
Findings also show Dubai and the UAE as a major trade and investment partner across the African continent. A good example of the growing trade partnership is a $300 million agreement in September, between the Investment Corporation of Dubai (ICD) and Dangote Cement in West Africa. In the same month, Qatar National Bank (QNB),
which already has a presence in North Africa, acquired a stake in Ecobank Transnational. The ICD also bought a significant stake in South African hotel manager, Kerzner International earlier in the year. Several others have invested in the continent, using a mix of private money and development loans.
In 2014, Dubai-based Jumeirah Group expand operations into North Africa with a management agreement in Mauritius. The group is also believed to be discussing deals in Nigeria, Angola, Kenya and South Africa. A recent deal between Emirates Airline (which already operates more than 160 flights a week to Africa) and TAAG Angola Airlines will improve connections to Central and South Africa. The Dubai International Financial Centre (DIFC) Courts has also signed its first Memorandum of Guidance with their counterparts in the High Court of Kenya advancing legal structures and enabling more confident investing.
DP World and Agility of Kuwait are present in ports and terminals; Bin Laden Group (Saudi Arabia) and Kharafi Group (Kuwait) have been building airports and roads; TAQA (Abu Dhabi) is erecting a power plant in Ghana; and Saudi
Arabia’s ACWA has recently invested in a coal plant in Mozambique, a solar facility in South Africa, and is bidding for plants in Botswana and Namibia. These deals show improved interest in Africa.
With robust infrastructure, geographic location and global connectivity, Dubai acts as a strategic and world-class hub for doing business with Africa. The emirate not only facilitates trade and investment flows into and out of the continent, it also provides a stable and secure base from which global firms can operate.
Islamic Financing
The growth of Islamic finance in Africa has played a major role in growing GCC investment on the continent.
Kenya, Senegal and South Africa are planning sovereign sukuk (sharia-compliant bonds) and these could open the door to a new flow of capital markets activity.
Funds glut
Although there are significant opportunities for GCC investors in Africa, said George Abed, senior counsellor and director Africa and the Middle East at the Institute of International Finance, cautions needs to be applied. This is because the “sudden surge in interest has made for a crowded field” and there are “probably now more funds than fundable projects”.
Zok also called for caution as he acknowledges that Africa is not always the easiest place to do business, therefore a careful analysis of markets and local partners is required.
“Political instability is something you have to work around; it is better if it is not there, but it does not rule out opportunities. You have to study a country, see how you can mitigate risk,” said Zok.
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