The dawn has broken and Africa is rising. There may be clouds in the sky but it is clear the southern continent is ready to do business.
As a result, many parts of the world are already joining hands with the emerging region. Africa has become the second most attractive investment destination globally, ranking just behind North America. A record $87bn of foreign direct investment (FDI) flowed into most of the region’s 54 economies last year; $60bn of that went to Sub-Saharan Africa, five times the 2000 level, according to the World Bank.
But Gulf states have been conspicuously quiet by comparison. They represent a minute percentage of FDI into Africa, and what money they do invest is typically centred in North Africa’s most stable economies, Egypt and Morocco.
China, on the other hand, is fast digging its heels into African soil, rising its FDI contribution to $3.5bn in 2013, according to the World Bank, and trade between China and Africa has reached $200bn — more than double that of the US. And it is no longer only commodities players reaping the benefits of Asia’s largest economy — the Chinese are helping to build all manner of infrastructure projects in nearly every country.
The US, a long-time friend of Africa, has invested a healthy $14bn and has long-term, deep relations, while European countries such as France and the UK have also been present for decades, thanks to their colonial ties.
There is ambitious competition to grasp the myriad opportunities in Africa. But despite its advantageous proximity, Gulf states are barely off the mark.
Why? Is it misperceptions? Misunderstandings? Or simply adversity to an unfamiliar risk?
It is fair to say the business and regulatory environment has hampered growth in many African economies, but, similar to the GCC’s experience following the global financial crisis, they are rapidly improving. Five African countries were among the top ten improvers globally in the 2015 Doing Business rankings for 2013-14. The continent accounted for the largest number of regulatory reforms — 75 of the 230 worldwide.
Arabian Business has featured multiple Middle East-based businessmen with operations in Africa — such as Mohamed Mansour, Sunil Vaswani, Ashish J Thakkar and Mohamed Alabbar — who have proven the case for profits is there, and the risk is worth taking.
Bill Gates, the world’s richest man and founder of the Bill and Melinda Gates Foundation, also highlights the “incredible opportunities” for the GCC in Africa in his comment piece on page 8 of this edition.
He says there are 400 million Muslims living in extreme poverty, many of them in Africa. Their governments want to provide them with basic living standards — healthcare, education, clean water, food security and access to energy — but they lack the resources, even with development aid.
But Africa does not only need money; it lacks experience and expertise. This presents a different, perhaps safer, opportunity for GCC states and businesses that have themselves grown into internationally competitive enterprises in the past four decades. Africa is crying out for advice in areas including urban development, how to exploit its vast tourism potential, manufacturing and aviation — themes the Gulf is itself mastering.
Trade is also an obvious entry point for scores of Gulf businesses. Sub-Saharan Africa presently accounts for only 2 percent of total world trade, and has been falling behind as global trade flows have expanded by 10 percent per year since 2000.
Situated between Africa and Asia — two of the fastest-growing regions — coupled with its internationally prestigious trade infrastructure, the Gulf is in prime position to fulfil demand.
In any emerging market, it is a matter of first come, first served. In Africa, the firing gun has sounded but the
GCC remains at the starting block. It has the money and expertise to catch up, but if it stalls much longer, the race will be over before it has barely begun.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.