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Fri 19 Dec 2014 02:08 AM

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GCC states looking to invest more in Africa as trade flows grow

New report says Gulf's push into Africa is broadening by sector and geographical location

GCC states looking to invest more in Africa as trade flows grow
Initially, Gulf investments in Africa were largely agricultural but that is changing.

Gulf Co-operation Council (GCC) countries are placing more attention on new markets in east, west and southern Africa as their trade flows with the continent expand, according to a new report.

The study released by the Economist Intelligence Unit (EIU) in conjunction with Falcon and Associates explores the GCC’s economic ties with each world region and identifies major growth drivers.

Key findings show the GCC’s push into Africa is broadening by sector and geographical location.

From telecommunications and private equity in West Africa to energy projects in South Africa and Mozambique, investment flows are diversifying, the report said.

Opportunities in infrastructure are a primary growth driver, where, according to World Bank estimates, $96bn a year is required to bridge the gap, while fast moving consumer goods (FMCG) is one of the fastest-emerging opportunities on the continent, driven by increased spending power and rising consumer needs.

Findings show Dubai and the UAE as a major trade and investment partner across the African continent.

This year, the Investment Corporation of Dubai (ICD) signed a $300 million agreement with Dangote Cement in West Africa and bought a significant stake in Kerzner International.

2014 also saw Dubai-based Jumeirah Group expand operations into North Africa with a management agreement in Mauritius and the 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.

In addition, the Dubai International Financial Centre (DIFC) Courts has signed its first Memorandum of Guidance with their counterparts in the High Court of Kenya advancing legal structures and enabling more confident investing.

Arab investors have also been behind a wave of foreign investment in African farmland, with opponents regarding them as land-grabs that eat into local people's food needs.

Undeterred, governments of countries including Zambia and Ghana argue that everyone can benefit from such investment provided it is properly regulated.

In a multi-billion dollar search for food security, desert states of the Gulf - which rely on imports for around 80 to 90 percent of their food needs - started investing heavily in farmland overseas around 2008.

Bad weather in large food producing nations, growing use of land for biofuel crops and curbs on agricultural exports by some governments had sent grain futures prices soaring at that time, prompting the Gulf spending spree to secure access to large scale food production.

Investments included land to grow crops like wheat, rice and maize in countries such as Sudan, Ethiopia and Namibia, but other African nations have so far been left out.

The report said Dubai acts as a strategic and world-class hub for doing business with Africa, with the emirate not only facilitating trade and investment flows into and out of the continent, but also providing a "stable and secure base from which global firms can operate".

The findings follow the success of the 2nd Africa Global Business Forum (AGBF), held in Dubai earlier this year and organised by the Dubai Chamber of Commerce and Industry.

Arabian Business digital magazine: read the latest edition online