GCC ramps up investments in Africa as markets mature and tensions ease

Global investor interest in Africa – including from the Arabian Gulf – has gathered momentum over the past year, with investments made in energy, agriculture and banking among other sectors. Though barriers remain, African business leaders said.

“We are seeing a tremendous amount of reform and good business across the continent,” Cheick Diarra, former prime minister of Mali, told a forum in Dubai this week.

“I anticipate we are going to see much of Africa growing economically in the years ahead. However, it is not moving as fast as it could, due to governance issues.”

Many African nations still need to enact business-friendly regulations and “re-position themselves to be competitive and take their piece of the [foreign investment] pie,” added Mr Diarra, who is also chairman of the Africa Legal Network, an alliance of African law firms which hosted the forum.

Useful measures could include tax reforms, better marketing and a crackdown on corruption – although much has been done already to tackle that issue, said Greg Mills, director of the Brenthouse Foundation, a think-tank in Johannesburg.

“By and large that evil is reducing,” Atiq Anjarwalla, managing partner of Kenyan law firm Anjarwalla Collins & Haidermota based in Dubai said during the event.

In recent years, GCC countries including the UAE have ramped up investment activity in Africa as markets mature, political tensions ease and new governments instigate reforms to attract foreign inflows to under-developed industries.

The UAE was the second largest investor country in Africa in 2016, with a capital investment of $11 billion and 12 per cent market share, according to a report by fDI Intelligence last year.

This was higher than Italy’s $4bn contribution in third place, though still some way behind China’s $36.1bn.

UAE-led foreign direct investment into African projects rose 161 per cent between 2015 and 2016, the report added.

Recent UAE investments into Africa include: Dubai Islamic Bank, the emirate’s biggest sharia-compliant lender, launching operations in Kenya last year; expansion of Abu Dhabi satellite company Yahsat’s broadband services to eight African markets last month; new African routes from Emirates and Etihad Airways; and Emirates Global Aluminium’s bauxite ventures in Guinea.

In October, the UAE government signed a deal with Uganda to establish one of the world’s only agricultural free zones to enhance food security in the Emirates, and Dubai’s DP World had earlier reported strong growth at its African port concessions.

With such high-profile investments, the commodity-rich continent has been “demystified”, said Mr Anjarwalla.

Egyptian bank EFG Hermes stepped up its coverage of frontier markets, such as Nigeria, this year in response to rising investor demand in traditional industries such as mining and oil, and emerging sectors such as technology.

The growth of Africa’s “mega-cities” – the result of rapid urbanisation – will fuel demand for global town planning and real estate services, with one planning company based in Dubai preparing to launch operations in Africa soon, the lawyer added.

The remaining barriers to investment are “the usual suspects”, including rule of law, political risk, currency volatility and swings in commodity prices, he said.

I anticipate we are going to see much of Africa growing economically in the years ahead CHEICK DIARRA Africa Legal Network