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AFRICA AND THE

MIDDLE EAST

01 Africa Cover.indd 1 18/04/2013 17:22

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www.meed.com Africa and the Middle East 2013 | MEED | 3

Africa and the Middle East

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4 Introduction Africa could be the next China

7 comment Dubai Chamber’s Hamad Buamim says Dubai is the ideal gateway

8 Interview Comesa secretary-general says Africa stands to learn from Dubai

10 Finance GCC-Africa financial links are starting to evolve from aid to investment

12 trade Trade levels could soar if Africa reins in its reliance on commodity exports

16 Logistics Improving infrastructure can help lift economic performance

20 agribusiness Fertile soil can provide food security and investment opportunities

22 Minerals Minerals sector grows more appealing due to high commodities prices

24 energy Africa could become the next energy frontier for GCC firms

26 telecoms The continent is one of the fastest growing markets for mobile providers

28 Key economic indicators Population and financial data

29 Data Economic indicators for selected Comesa countries

The potential for growth in bilateral trade between Africa and the Middle

East is the subject of this special supplement published by MEED in sup-

port of the Africa Global Business Forum, the largest event ever held in

the GCC around doing business in the continent.

The supplement sheds light on some of the biggest opportunities now on offer

in different parts of Africa and encourages Middle East business to be bold and

brave. In an inspiring introductory article, Jeffrey Herbst and Greg Mills forecast

that Africa could become the next China for the global economy.

The response in the Middle East is expressed by Hamad Buamim, the director-

general of the Dubai Chamber of Commerce & Industry (see page 7). “No other

continent will grow more strongly over the coming years than Africa,” he writes.

“I see [Dubai] as a gateway to trade and investment flows into and out of the

African continent.”

Sindiso Ngwenya, secretary-general of the Common Market for Eastern &

Southern Africa (Comesa), returns the compliment in an interview featured on

pages 8-9. “I am positive about the potential for trade and investment between

the two regions to the extent of being euphoric,” he says. He opines that Africa

can learn a lot from Dubai, which is already playing a role in helping African busi-

ness reach out to new markets.

The sectors with the greatest potential in the continent are examined in this

supplement and will be investigated further at the forum: finance (page 10) logis-

tics and transport (page 16); agriculture (page 20); minerals (page 22); oil and

gas (page 24) and telecommunications (page 26). It also includes useful eco-

nomic data in a handy reference form.

MEED would like to thank the Dubai Chamber of Commerce & Industry for facili-

tating the publication of this supplement. It will be distributed to all delegates at

the forum, which the Chamber is organising in partnership with the Comesa

Regional Investment Agency. We are also indebted to the Comesa team.

Enjoy the MEED Africa Supplement.

eDMUnD o’sULLIvan CHAIRMAN oF MEED EvENTS

Africa: the next investment frontier

Member of the audit bureau of circulation

all rights reserved © 2013 MEED Media FZ llc, a 4c service – part of top right Group

Printed by headley brothers ltd, uKregistered as a newspaper with the Post officeissn 0047-7238

MeeD HeaD oFFIceal-thuraya tower 1, 20th Floor, office 2004, Dubai Media city, Po box 25960, Dubai, uaEtel +971 (0)4 390 0045Fax +971 (0)4 368 8025Email: [email protected]

eDItoRIaL Editorial Director richard thompson +971 (0)4 433 1426richard.thompson@Managing Editoraaron Greenwood +971 (0)4 390 0439aaron.greenwood@Editor (MEED magazine)Elizabeth bains +971 (0)4 433 1423elizabeth.bains@News Editorcolin Foreman +971 (0)4 367 8190colin.foreman@Supplements Editoraustyn allison +971 (0)4 374 8191austyn.allison@Production Editor Ken campbell +971 (0)4 375 5012ken.campbell@Senior Sub Editor David George +971 (0)4 433 2807david.george@Sub Editor ananda shakespeare +971 (0)4 433 1422ananda.shakespeare@Art Editor Martin staniszewski +971 (0)4 375 7988martin.staniszewski@Contributors sneha abraham, Marianne Makdisi, nancy el-Khoury

aDveRtIseMent saLes Head of Supplements nicholas viegas +971 (0)4 390 0697/ +971 (0)50 550 3092nicholas.viegas@Saudi Arabia Enquiries ali Jaber +966 (0)1 479 7692/ +971 (0)50 455 9153ali.jaber@Europe Enquiries ryan stewart +44 (0)20 7728 [email protected] Support Monica D’souza +971 (0)4 390 0698Monica.dsouza@

cUstoMeR seRvIcesRetention and Client Relations Managervladimir supancic +971 (0)4 367 1232 customerservice@

MeeD InsIgHt Head of Insight Ed James +971 (0)4 367 1231 edward.james@

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top RIgHt gRoUp HeaD oFFIcethe Prow, 1 wilder walk, london w1b 5aP, uKtel +44 (0)20 7715 6000 For a full list of reader services, editorial and advertising contacts visit www.meed.com

03 Contents&Eds Letter.indd 3 18/04/2013 15:39

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4 | MEED | Africa and the Middle East

CAn AfriCA bECoME thE nExt ChinA? Growth must benefit the entire

population, not just a tiny elite

much better in Africa); landlocked and littoral; autocratic and democratic (the latter now the over-whelming majority). In particular, Africa’s larger countries, such as the Congo, have generally had a poor development record since independence, which in part is due to the extent of the territory and the complex make-up of their societies, con-sisting of many nations within a single state.

Favoured modelThe biggest challenge of all remains the gulf between those who favour the distributional model of growth over the model based on enter-prise through entrepreneurship and the creation, by government, of an enabling environment. Until now, African entrepreneurs have made progress by circumventing their governments.

The stakes are extremely high. If sub-Saharan Africa, for example, grew at more than 5 per cent for a generation, its people would have the same wealth levels as Argentina today; growth at 3-4 per cent would bring them up to Brazil’s levels. At the same time, failure to follow a substantial growth trajectory will mean no end to the severe poverty that currently afflicts so many of the conti-nent’s citizens.

The past century of growth illustrates how its key tenets of trade, open markets, macroeco-nomic stability and prudence, fiscal conserva-tism, and the centrality of entrepreneurs and human capital constitute the necessary package

but its perpetuation is often grounded in self-interest. Either business is kept very close, and evolves into a government client rather than a source of dynamism, or it is regarded with hostility, a prey to be devoured if circumstances demand. In this environment, politicians have limited under-standing of how the private sector works and grows. A more hopeful scenario will not materialise without a fundamental commitment from govern-ments to a set of policies that shift political econo-mies from an emphasis on distribution to a laser-like focus on growth.

While Africa remains an exceedingly poor conti-nent, with an average annual per capita income level of just $1,000, the patterns of growth have varied greatly between states. Some have become richer, while others have failed. This is a positive phenomenon, showing that African countries no longer fall into a single category, but, as in other developing regions, comprise all kinds: performers and failures; big and small (which usually achieve

Africa is a rich continent. Thirty per cent of the globe’s natural resources are vested in

its land mass, as is 60 per cent of the world’s ara-ble land. But little of this has benefited the people of a continent where some 400 million still live near or below the poverty line and where 200 mil-lion inhabit fragile or failed states.

The current political environment in Africa offers the possibility – but it is not an inevitability – that leaders will develop the kind of productive economic policies that have led to growth and development elsewhere, notably in East Asia. Examples from that region and other parts of the world such as Latin America show how such a transformation is not only possible but rapid. Only 50 years ago Asian countries were themselves seen as developmental backwaters.

Creating jobsTo achieve this, African nations will have to meet two challenges in particular. First, they must trans-form their wealth in minerals and other natural resources to benefit their entire society.

While natural resources have driven African economic growth rates to record levels over the past decade, this has not translated into the jobs required for the continent’s young people. By 2050, at current rates, Africa’s estimated popula-tion of 2 billion will have overtaken that of both India (projected to be 1.6 billion) and China (1.4 billion). As a result of this growth, not only will one person in five in the world be African, but also one in four workers.

Providing the conditions to create employment is a continental imperative. Today, eight in every 10 Africans are self-employed. The question then is can the number of jobs required be created? Or, in other words, can Africa become the next China?

Given that commodity prices will be relatively robust in the foreseeable future due to demand from Asia, it will not be that hard for many African countries to achieve reasonable (4-5 per cent) growth that compares favourably to what they had in the past. However, such growth will not neces-sarily yield jobs and other developmental benefits unless these countries undertake to transform their patronage-based systems.

The second challenge is the need for African leaders to end their public and private animosity towards business. This stance may have its origins in colonial rule and perceptions of ‘them and us’,

“the second challenge is the need for leaders to end their public and private animosity towards business”

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Responsibility: Local ownership of development is crucial for progress in African countries

introduction

04-05 Intro.indd 4 4/18/13 3:19 PM

www.meed.com Africa and the Middle East | MEED | 5

“The hurt to pride, person and fortune inflicted by colonialism still lingers across much of the continent”

for economic advancement. What is perhaps less well understood, especially in Africa, is that, with suitable alterations for specific circum-stances, this general model can be applied to a wide range of countries.

Despite the numerous successes throughout the world and the unprecedented reduction in glo-bal poverty, many in Africa still want to reject the main tenets of the conventional model. Often, the rise of Asia and the BRIC countries (Brazil, Russia, India and China) is seen, at least in much of Africa, as a counterbalance to the Western way and to those traditional markets, offering not only greater opportunities to African countries but an alternative path for development, one less con-strained by external conditions and mores. To a degree, this is understandable. The hurt to pride, person and fortune inflicted by colonialism still lin-gers across much of the continent.

Aid conditionsThe search for alternatives to the Western way is no doubt influenced by the insensitivity of Western development and aid practitioners in their clumsy attempts to impose conditions on Africans for how aid could be spent, in the hope that this would steer bankrupt governments on to a more fiscally prudent and managerially sound path. Of course, this approach conveniently forgets that the donors themselves had not developed in an externally directed manner through the charity of others.

Africa’s recent, unprecedented economic growth on the back of Chinese interest in its commodities shows, if nothing else, that aid from the West is not the only way (if it is a useful method at all) of developing Africa. It also illus-trates the desirability for a model that Africans can call their own.

Local ownership of development is, despite what donors have attempted, crucial for progress. In the most successful countries, leaders take full responsibility for their country’s economic destiny. In Africa, there remains, in particular, an aversion to the public embrace of markets, let alone capi-talism, even if that is precisely what some African countries are doing.

To achieve a future with not just economic growth, but more jobs, African countries will need, at the outset, to develop a ‘growth ideol-ogy’ beyond the vacuous vision documents that litter the policy landscape. Rather than employing more consultants, governments and ruling parties will need to drop their animos-ity to business, which often has its origins in racial exclusion or perceptions of rivalry. This demands government coming to an understand-ing with business, of remedying stultifying atti-tudes varying between benign neglect and osten-tatious antagonism.

Governments have the key role in this transi-tion. They also need to establish an infrastructure for economic development and address the bind-ing constraints of transport and electricity. Sub-Saharan Africa’s electricity production is equiva-lent to that of Spain, even though it has nearly 20 times as many people. Two-thirds of that is produced by just one country, South Africa.

If not addressed, such constraints will curtail growth or, in some cases, stop development dead in its tracks. Spending on infrastructure will pay very high dividends over a long period of time, especially transformative projects, such as the 40,000MW Grand Inga hydropower scheme on the Congo River, adding more than half again to sub-Saharan Africa’s current electricity output. So will better educational systems, focusing not only on providing school places, but also the impor-tance of relevant curriculums, the mastery of sub-jects and completion by pupils.

With $70bn in such transformative projects identified by the African Development Bank (AfDB) alone, there is plenty of scope for outside inves-tors to play in meeting these needs and in the continent’s growth. At its core, Africa will have to act on the realisation that to create jobs, it needs to attract the sort of investors that can go to many other countries. It is in these sectors, and not in natural resources, that the jobs exist.

For most foreign investors, the decision turns on how easy it is to do business. They are inter-

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ested in levels of corruption along with policy sta-bility and predictability.

Some governments believe that they can, in this, ‘pick winners’ to encourage investment. The success rate from this is not encouraging, not least since this is not where governments’ advan-tage lies. Similarly, while incentives, including the establishment of special economic zones, can encourage investment, not least by serving to insulate companies from government weak-nesses, these are at best temporary fixes. Busi-ness inexorably outgrows such measures.

As intimated above, it is much more important for governments to set an overall economic envi-ronment in which the private sector can pick its own winners.

Political focusMore than anything, Africa’s continuing transfor-mation demands pinpoint concentration on devel-opment for generations. There is a key political dimension to this.

Instead of focusing on issues of identity and difference, including race, tribe and religion, Afri-ca’s elections will need to mature to feature hard economic choices and the record of delivery. If the continent’s first liberation was from colonial and racist government, and the second from the liber-ators, the third is the change in focus of politics itself. Concentrating on economic development to the exclusion of much else is required. With this approach, Africa can show, as did East Asia, that in development nothing is inevitable.

Once a few positive African neighbourhood job-creating exemplars are in place -- islands of excellence in the words of AfDB head Donald Kaberuka – the stage will be set for a virtuous, fresh cycle of investment, growth and replication. Here, external partners, such as the GCC, will have a key role to play, not only in helping supply the investment for a hungry, high-yield market, but also in ensuring that African countries stay on the course of reform.

In becoming the next China, it does not mat-ter if Africans call their economic strategy “the embrace of the free market” or anything else recognisable to Westerners. What is important is that the continent’s states should have a rigor-ous vision of how to grow, and how growth will be used for the benefit of their populations, not a tiny elite.Jeffrey Herbst and Greg Mills

■ Jeffrey Herbst is president of Colgate Univer-sity in the US; Greg Mills directs the Brenthurst Foundation, based in Johannesburg. They are authors most recently of Africa’s Third Libera-tion: The New Search for Prosperity and Jobs.

AfricA populATion And economic AcTiviTy

source: african Development Bank

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04-05 Intro.indd 5 4/18/13 3:18 PM

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Africa and the Middle East | MEED | 7

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doing just this, including Switzerland’s Nestle, Louis Dreyfus, one of the world’s largest commodity trad-ers, and MiDCOM Group, the largest Nokia distribu-tor in the Middle East and Africa region, all of which base their Africa offices in Dubai. At the same time, African entrepreneurs seeking expansion into Euro-pean, Asian and the US markets can use Dubai as a base for all the same benefits as global firms seeking a base for their African operations.

Already, a number of UAE companies have been major players in Africa for some time. DP World has had a presence in the continent since 2000, and now runs the port of Dakar in Senegal and port operations in Djibouti, Algeria and Mozambique. Meanwhile, telecoms firm Etisalat has stakes in Atlantique Telecom, which operates in about six countries in West Africa, as well as Tanzania’s Zan-tel and Sudan’s fixed line operator Canar. These companies are proving that business opportunities exist across Africa for foreign investors, and we hope that through the upcoming Africa Global Busi-ness Forum we can encourage more.

Key sectorsThrough the forum, we will be focusing on the key sectors that have major potential for investment in Africa and room for business synergies with companies in Dubai and across the emirates. Take, for instance, agribusiness; it has the poten-tial to drive the continent’s development since agriculture remains by and large the biggest employer in Africa. The UAE imports more than 80 per cent of its food, spending AED25.5bn on food imports in 2010. Dubai has more than 13,500 food establishments and imports food from more than 150 countries.

Looking ahead, DCCI’s commitment to Africa will not end with the conclusion of the business forum. Over the next three to five years, we will be encouraging more investment and two-way busi-ness flows by opening overseas offices in key loca-tions across Africa. Our first such office, which is in the final stages of preparation, will open in Addis Ababa in Ethiopia. In terms of our commitment to the continent, we are serious in our focus and are looking to the long term for joint prosperity.Hamad Buamim

small markets, and varied practices and regula-tions. One approach is to segment the continent regionally, which its policymakers encourage, and where Africa’s regional economic communities have either established free trade areas or are working towards it.

With regards to the role Dubai can play in Africa, I see the emirate as a gateway to trade and investment flows into and out of the continent. Historically, Dubai has always been a major transit point for goods and trade from Africa to the rest of the world and vice versa, and this is a role that we are seeking to build on over the coming years.

Global firms looking to do business in Africa are well advised to use Dubai as a stable and secure base from which to operate. The city’s extensive infrastructure and modern banking, financial and legal systems offer good protection for investors and facilitate the ease of doing business. There are a number of successful global companies

African markets are an increasingly impor-tant focus for global businesses today. The

continent is home to some of the world’s fastest-growing economies and offers the highest risk-adjusted returns on foreign direct investment among emerging economies.

With an economic future driven by a young workforce of consumers, entrepreneurs and business people, mining and oil are big industries, but infrastructure investment and the consumer market also hold major potential for growth. The Dubai Chamber of Commerce & Industry (DCCI) has been working to enhance trade and commercial ties across Africa for several years, and that is the reason why we have organised the Africa Global Business Forum 2013, held under the patronage of Sheikh Mohammed bin Rashid al-Maktoum, vice-president and prime minister of the UAE and ruler of Dubai.

Growing tiesExamining five key sectors – agribusiness, trade, logistics, finance and tourism – the business forum will highlight the growing ties between the UAE and the African continent. A good example of this is Dubai’s non-oil trade, which has expanded considerably from AED10.6bn ($2.9bn) in 2002 to AED84.8bn in 2011. This is a rise of 700 per cent, fuelled by Africa’s growing populations and affluent middle classes.

Estimated to be about 313 million, Africa’s middle classes are driving demand for consumer goods and products, international brands, electri-cal goods and technology. At the same time, 70 per cent of its population is under 35, which is also helping to power further economic develop-ment and diversification.

The Washington-based IMF has predicted that no other continent will grow more strongly over the coming years than Africa. At the same time, gov-ernments across Africa are working to improve the business climate, which can only serve to strengthen its investment potential.

Despite all the positives, some investors still view business opportunities in the continent with caution, given the various challenges and obstacles that exist there. These vary widely from country to country, and it is difficult, if not naive, to treat doing business in Africa in one uniform way. The continent is home to 54 different sovereign states, each with uneven development, numerous

Buamim: DCCI will encourage investment in Africa

DubAi to fAcilitAtE AfricAn growth The emirate will act as a gateway

for investment flows for the region

“global firms looking to operate in Africa are well advised to use Dubai as a stable and secure base from which to operate”

■ Hamad Buamim is the director-general of the Dubai Chamber of Commerce & Industry.

comment

07 Dubai Chamber.indd 7 4/18/13 3:17 PM

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“At that time, our entire regional trade was $1.3bn,” says Ngwenya. “It’s now approaching $20bn. Over that time, we have seen diversifica-tion of trade among Comesa states. We have found that you start with trade and investment follows.”

One of the fears was that the Comesa FTA would lead to companies closing operations to focus investments in countries with the lowest costs. “The opposite has happened,” he says. “Instead of producing in just one country, they are working across the region. Companies that were national champions have become regional champions.”

Building institutionsNgwenya lists institution-building as another major Comesa achievement. The organisation now has eight, including the PTA Bank, with assets of more than $1.2bn; the Re-Insurance Company; the Regional Investment Agency; the Comesa Clear-ing House, which can process cross-border pay-ments within 24 hours; and the African Trade Insurance Agency, set up in 2002 to provide politi-cal risk and other forms of cover.

The journey towards closer economic union is continuing. Comesa launched its customs union on 9 July 2009. It is a work in progress. “We have not yet fully implemented the customs union and an extension has been given to 2014,” says Ngwenya.

A fund to provide support to economies under-going structural change has been established. Comesa is now looking to mobilise finance for investment into infrastructure, a critical deficiency hindering growth throughout the region. It has put $10m into a Comesa infrastructure fund that aims to raise $1bn for key projects.

“Some of the projects will be showcased at the forum,” says Ngwenya. Comesa is now working on floating a regional infrastructure bond. The PTA is leading the transaction and Comesa is studying where to list the bonds.

Climate change is a new area of focus for the organisation. “We now have more than 1.5 million farmers working under our conservation pro-gramme,” says Ngwenya. “What we have seen in these programmes is that yields have increased.” Comesa is pressing for the UN’s Clean Develop-ment Mechanism Programme to be extended to cover farming. “There is pollution in agriculture and forests are carbon sinks that will be lost if

Comesa, which is headquartered in Lusaka in Zambia, wants to help make it happen and add to the growing list of the organisation’s achievements. A turning point was the launch of a Comesa free trade area (FTA) on 31 October 2000.

On 1-2 May, the largest ever gathering of business people from Africa and the UAE

will take place in Dubai. The Africa Global Busi-ness Forum (AGBF), organised by the Dubai Chamber of Commerce & Industry, reflects the growing trade and investment links between Africa and the UAE, as well as the wider Middle East.

The forum is being supported by the Common Market for Eastern & Southern Africa (Comesa) Regional Investment Agency, an association of 19 countries extending from Egypt to Zimbabwe, with a combined population approaching 400 mil-lion. It was created in 1994 to succeed a more lim-ited preferential trade area set up in 1981.

“I am positive about the potential for trade and investment between the two regions to the extent of being euphoric,” says Comesa secretary-general Sindiso Ngwenya.

Trade linksThe AGBF, which will attract up to 2,000 partici-pants, is a radically expanded version of a Comesa workshop hosted by the Dubai Chamber two years ago. This time, the context for extending Africa’s trade ties has distinctly improved for two reasons. One is evidence of strong growth in sub-Saharan African countries. The second is that GCC states are looking for new partners as the world adjusts to the long-term consequences of the 2008 financial crash. America’s growth is modest and Europe’s is even lower. Investors must look elsewhere for opportunities. For many Middle East businesses seasoned in trading in places where others fear to tread, Africa has the appearance of a promised land. ph

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CoMEsA-gulf tiEs to flourish Comesa secretary-general says

Africa stands to learn from Dubai

“i am positive about the potential for trade and investment between the two regions to the extent of being euphoric”Sindiso Ngwenya, Comesa

Comesa faCT Boxmembers (19): Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabweaggregate estimated gross domestic product (GDP) in 2012: $580mPopulation: 389 million (2011)GDP per capita: $1,527Total exports (2011): $113bnTotal imports (2011): $154bn

Ngwenya: Investors welcome if they can add value

CoMEsA CountriEs’ EstiMAtEd gdP in 2012

gDp=gross domestic product; Dr Congo=Democratic republic of Congo. Source: IMF, March 2013

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are seeing investment taking place in agriculture and food processing, pharmaceuticals and tex-tiles by investors from this part of the world,” says Ngwenya. “We are seeing these things happen because of trade. It is because people get to know each other.”

But how welcome will Middle East investors be in Africa? Ngwenya turns his mind to the controversy over Chinese involvement in sub-Saharan Africa.

“There are different types of investors with differ-ent priorities,” says Ngwenya. “You have market-seeking investors locating in Africa because there is a young population, rising incomes and, very soon, a middle-class population of 200 million. You also have investors that are resource-seeking. Investors in African countries facing civil strife sometimes became robber barons. We saw that in the Democratic Republic of Congo.”

they are destroyed,” he says. The idea is for farm projects to be able to secure carbon credits if they achieve sustainability and emission goals.

“We are working with the government of Rwanda,” says Ngwenya. “They have prisons that use human waste to produce biogas and provide energy in the jails. Through carbon credits, they will get well in excess of $10m a year.” Comesa has already set up a carbon fund for Mauritius. Other areas are being studied. “Even when it comes to mining, you can get gas, power and organic fertilisers,” says Ngwenya. Comesa is about to invite expressions of interest in the con-tract to develop the Comesa climate change plan.

But trade is at Comesa’s core. “From 1 April 2013, we are launching a virtual trading system,” says Ngwenya. “This entails the use of informa-tion and communications technology for cargo tracking.” He expects it to reduce trade costs by 30-40 per cent.

Growing influenceIt has taken time, but Comesa‘s impact is expanding and Ngwenya has no doubt about its value. “Comesa has, on a pragmatic basis, been able to implement programmes for trade facilitation,” he says. “It also has a wide range of institutions that have promoted regional eco-nomic cooperation.”

The organisation aims to expand. “We have lost some members, but we have gained some as well,” says Ngwenya. “Applications to join from Algeria and Tunisia are with me. We are working to connect Comesa with the East African Community (EAC) and the Southern African Development Community (SADC). We have a target by 2014 to launch a tripartite FTA.” The Comesa-EAC-SADC deal will engage countries with a population of 600 million people and combined GDP of more than $1 trillion.

The logical next step is to encourage trade between Africa and high-growth neighbouring regions, which is where the AGBF comes in. Dubai is already playing a key role in helping African busi-ness reach out to new markets. “A big factor is the contribution made by Emirates airline, which flies to 22 African destinations,” says Ngwenya. “There are 650 flights to Africa each week. This helps business find different routes for accessing markets in Asia and the Commonwealth of Inde-pendent States. Then there is the role of the Dubai International Financial Centre. It is a finan-cial entity in which you have international banks and sovereign funds. There is also the connection with Africa through Dubai Aluminium. It wants to get into Africa and beneficiate at source. Even in horticulture, trade is happening.”

Comesa’s experience shows African develop-ment will be promoted best through trade. “We

But Ngwenya says there is no evidence that resource-seeking Chinese investors are different from those from the West.

“It is not true that they are dominant,” he says. “Canadians and Australians are the most active. In Zambia, where China has set up to take the copper, it does not account for more than 10 per cent of the copper produced in the country.”

The message is that so long as investors add value, they are welcome in Comesa.

Dubai lessonsSo what can Africa learn from Dubai? Ngwenya sees four things: “Dubai’s progress shows you need leadership that is clear and committed to make things happen,” he says. “Second, the pub-lic sector and the private sector must work collab-oratively. Third, the whole process must be based on meritocracy. In my region, this is where the problem is.

“There is a fourth factor,” Ngwenya adds. “Dubai is like the US. It is a polyglot society. We should try to get some of the genes for trade from Dubai.”

“We can only do that through joint ventures. It will be a process. If Dubai has been successful with free zones, let us imitate them.”Edmund O’Sullivan

Trading partners: Middle East businesses are looking to strengthen their economic ties with Africa

“It has taken time, but Comesa‘s impact is expanding and Ngwenya has no doubt about its value”

08-09 Comesa.indd 9 4/18/13 3:16 PM

www.meed.com



AfricAn finAncing drAws gcc stAtEs GCC-Africa financial links are starting

to evolve from aid to investment

structure and building materials firm based in South Africa, with presence in 13 other countries; e14.3m ($18.7m) in Thunnus Overseas, a tuna canning firm active in Ivory Coast, Madagascar and France; and e35m in Mixta Africa, a real estate developer with projects in Senegal, Mauri-tania and North Africa.

Beyond investment, there is another key facet of the GCC states’ financial relationship with sub-Saharan Africa: their role as aid donors. This was pioneered by the Kuwait Fund for Arab Economic Development (KFAED). As its name suggests, this was originally set up to assist other Arab countries, but from 1974, the list of potential aid recipients was extended to a wide range of other nations.

Financial assistanceThe KFAED provides mainly concessional loans, technical assistance and training. Sub-Saharan countries are major recipients. Although the fund is particularly active in countries with large Mus-lim populations such as Senegal, Mali, Niger, Kenya and Tanzania, it also finances projects in many other African states.

The KFAED frequently operates as a co-financier, in partnership with other donors, to share the costs of major schemes.

By mid-April this year it had provided a total of KD482.6m ($1.7bn) in funding to West African countries, among which the biggest recipient (of KD95.4m) was Senegal, which has long cultivated close relations with Kuwait and other GCC states.

The broader economic context for these funds has been the resilience of economic growth in sub-Saharan Africa, which was less affected by the global financial crisis and economic slowdown than most other regions of the world.

From 2004-08, sub-Saharan Africa’s real gross domestic product (GDP) growth averaged 6.5 per cent a year. Even in 2009, the year of the global crisis, it was 2.8 per cent, and it has since rebounded to the 5-6 per cent range. Smaller economies and those dependent on imported oil have generally performed well.

Social indicators are slowly improving in many countries and the continent is seeing the emer-gence of a substantial educated middle class, reinforcing political stability and enhancing demand for consumer goods and services.

The PAIP funds reflect the growing resilience of economic activity and demand within Africa itself. The first fund targeted profitable businesses in high-growth sectors all over the continent. The second has done likewise. Its major investments have included $20m in Buildworks, a power infra-

Africa is not a prime target for Gulf banks, but when it comes to investment and devel-

opment assistance, the financial relationship between GCC economies and sub-Saharan Africa is gaining momentum.

Impressive rates of economic growth, large populations and rich mineral resources hold clear attractions for portfolio investors seeking to diver-sify their global exposure.

By contrast, for newcomer banks, Africa is a tough challenge. Sub-Saharan countries have been a profitable niche market for banking groups with networks on the ground and the knowledge to engage safely in local lending, and trade and commodity finance. But without local connections and expertise, it is hard for outsiders to identify worthwhile banking business – apart from large resource projects – and manage it effectively.

However, foreign direct and portfolio investment are shaped by a different logic and sub-Saharan countries have begun to stir the interest of one or two influential GCC players.

Kingdom HoldingBy far the most prominent is Kingdom Holding Company chairman Prince Alwaleed bin Talal bin Abdulaziz al-Saud. His group has established a private equity firm that specialises in Africa: King-dom Africa Management Company.

Prince Alwaleed has cultivated high-level rela-tions south of the Sahara, visiting Nigeria for talks with President Goodluck Jonathan in December 2011, and then travelling to Republic of Congo, Rwanda and Burundi in August last year for fur-ther meetings with African leaders.

Kingdom Holding has been taking an interest in the continent for almost two decades, launching the South Africa Capital Growth Fund and the South Africa Private Equity Fund in 1995.

These were followed by the ZM Africa Invest-ment Fund (ZMAIF) in 1997, targeting private equity investments in South Africa and other markets in the Southern Africa Development Community (SADC) bloc. The fund focused on high-growth busi-nesses, and as these have progressed it has been able to gradually divest from them. The next phase of the strategy was the creation of the Pan-African Investment Partners I (PAIP I) fund in 2003, with launch capital of $122.5m, followed five years later by Pan-African Investment Partners II. The latter finally closed in 2010 with $492m of capital.

“gulf investors have been attracted to the resilience of economic growth in the countries of sub-saharan Africa”

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Strategic aid: The Saudi Fund has helped in the financing of the Taoussa dam on the Niger river

finance

10-11 Finance.indd 10 4/18/13 3:14 PM


“Saudi Arabia’s Prince Alwaleed has established a private equity firm that specialises in African investment”

KuwAit Fund – Aid loAnS by Sector

Source: Kuwait Fund

weSt AFricA

SudAn

centrAl/South/eASt AFricA

MAuritAniA

Other major West African beneficiaries are Guinea (KD48.6m) and Ghana (KD39.6m).

Cumulative funding for central, Eastern and Southern Africa has amounted to KD358m, with the largest amounts going to Tanzania (KD50.9m) and Ethiopia (KD43.3m).

Sudan, administered within the Arab countries portfolio of the fund, has received KD227.4m; so far, separate data for South Sudan – independent since 2011 – is not available. Mauritania, also administered within the Arab portfolio, has received KD107.3m.

In sectoral terms, in Africa, the KFAED has given overwhelming priority to funding transport infrastructure, allocating KD205.2m to this in the centre, east and south of the continent, and KD271.8m in the west. Communications, energy, industry and agriculture are other favoured sec-tors, though not to the same extent.

Kuwaiti aid to sub-Saharan Africa tends to focus on the drivers for economic growth more strongly than on social sectors.

Supporting AfricaSaudi Arabia and Abu Dhabi are also substantial bilateral donors to Africa. The Saudi Fund for Development, established in 1975, has a long track record of sub-Saharan engagement. By 2009, Africa accounted for more than half the countries and more than half the projects the fund had financed.

One of the most important projects it has assisted is the Marawi dam in Sudan, with a total support of $310m (including $100m channelled through the Saudi export programme). This accounted for more than 10 per cent of the cost of the massive project.

Other Gulf-based bilateral donors were heavily involved. The Kuwait Fund and Abu Dhabi Fund for Development contributed $200m each, Oman contributed $106m, and Qatar $15m.

The Saudi Fund has concentrated its aid to sub-Saharan Africa on a much narrower range of coun-tries than the KFAED: Benin, Cape Verde, Ivory Coast, Ethiopia, Gambia, Mali, Mauritania, Sierra Leone and Uganda. The focus is often strategic infrastructure, such as an 86-kilometre section of road between Yamoussoukro and Snkarobo in Ivory Coast. In Mali, the fund has been part of the financing consortium for the important Taoussa dam on the Niger river.

In Benin, the Saudis have been supporting regional development through university institu-tions in provincial towns and being part of a regional hospital programme. In Uganda, they have been supporting the construction of 14 tech-nical and vocational education institutes.

Overall, some SR15.6bn ($4.1bn) has been allocated to African projects by the Saudi Fund,

which is about 47 per cent of all its activity. The figures cannot be directly compared with those from the Kuwaiti fund because they include North Africa; Arab states are not categorised separately.

The Abu Dhabi Fund for Development also has a history of significant engagement south of the Sahara, particularly in Sahelian countries and in East Africa. The fund has fewer than 100 staff.

Slow approvalAs with any donor arrangements, the pace of devel-opment is to some extent dependent on the capac-ity of the recipient country to implement schemes. Only one project has been approved in Democratic Republic of Congo, one of Africa’s largest countries but one that is highly unstable and has serious gov-ernance problems. That was a package of balance-of-payments support back in 1987. By contrast, tiny Djibouti – stable and strategic – has benefitted from three funding allocations.

There is a flow of investment in Africa from the GCC, but it has been largely aid-based. As the continent matures and Gulf financial enti-ties become more experienced, this is likely to change.Paul Mellyph

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EttY

IMag

ES

transport

transport

transport

transport

agriculture Industry

Industry, energy, development banks, other 1

56

71

57

32

10

10

6

46

4

5

4

104

11

13

6

22

%

%

%

%

13 16

31

Industry

Industry

agriculture

agriculture

CommunicationsCommunications

Communications

Social Water and sewerage

Water and sewerage

other Social

Social

Energy 1Energy 2

Development banks 1

Development banks 1

Water and sewerage 1

Water and sewerage

other 2

agriculture

Sub-SAhArAn AFricA GdP Growth

gDp=gross domestic product. Source: IMF

8

7

6

5

4

3

2

1

0

20042006

20052007

2009201

22008

2010

2011

(PercentAGe)

0

1

2

3

4

5

6

7

8

10-11 Finance.indd 11 4/18/13 3:14 PM

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GCC-AFRICA TRADE FLOWS TO GROW Trade levels could soar if Africa reins

in its reliance on commodity exports

Despite its endowment of globally desira-ble natural resources, sub-Saharan Africa

is one of the worst performing regions when it comes to trade. That is true both in terms of intra-regional commerce and dealings with the rest of the world. However, international investment has been picking up and, if the continent can move away from relying on commodity exports, there is a chance that trade levels could quickly rise.

Currently, just 13 per cent of African exports go to other countries on the continent, according to the Switzerland-headquartered World Trade Organisation (WTO). Only the Middle East, where 10 per cent of exports stay in the region, performs worse on this count. Other parts of the world man-age far higher levels of intra-regional trade. In Latin America and the Caribbean, the figure is 29 per cent; in North America, 48 per cent; in Asia, 54 per cent; and in Europe and the former Soviet countries of the CIS it is 75 per cent.

Lacking diversity The low level of intra-African trade is due to weak economic and infrastructure ties between coun-tries, coupled with a lack of diversity in what nations produce. Just as Gulf economies are reli-ant on oil, in Africa most exports are drawn from a relatively small list of commodities.

These commodities include oil and gas from Angola, Cameroon, the Democratic Republic of Congo, Equatorial Guinea, Gabon and Nigeria; cocoa and coffee from Burundi, Ivory Coast, Ethio-pia, Ghana and Rwanda; aluminium from Guinea and Mozambique; cotton from Burkina Faso and Mali; cashew nuts from Gambia and Guinea Bis-sau; and tobacco from Malawi.

While crude oil brings in significant sums for a number of African countries, overall trade levels remain small by global standards. Close to 60 per cent of African exports by value are accounted for by oil, natural gas and related products.

In total, the continent’s merchandise exports were worth $572bn in 2011, lower than for other regions. Figures from the WTO show that only two sub-Saharan African countries – Nigeria and South Africa – had more than $25bn-worth of trade in commercial services in that year. Mean-while, the value of merchandise trade for each country on the continent was less than $250bn.

At those levels, African countries generally sit in the bottom half of global league tables. Nigeria ph

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Low: In total, Africa’s merchandise exports were worth $572bn in 2011, lower than for other regions

Trade

12-14 Trade.indd 12 4/18/13 3:13 PM


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AfricA top 10 merchAndise exports* AfricA top 10 merchAndise imports*

*=to world. Source: International trade Centre *=From world. Source: International trade Centre

and South Africa are the only two to feature in the WTO’s list of the 50 largest exporters, with exports of $116bn and $97bn respectively in 2011. None features among the world’s 50 big-gest exporters of commercial services.

A key problem is that Africa generally ships cheaper raw materials, rather than the manufac-tured goods and high-end services that people pay more for. “The lack of [added value] in so much of the continent’s exports [means] it is still not getting to the point where a new African urban class lives by the value-added sectors of manu-facturing and services,” says one former senior UN development official.

Increasing tradeAfrica’s trade profile helps to explain why the value of trade between sub-Saharan Africa and the GCC countries is limited: the Gulf is certainly not in need of hydrocarbons imports, so trade has to revolve around other products. However, it has been growing quickly. In the first decade of this century, GCC exports to Africa grew by an average of 14.7 per cent a year and imports increased by an average of 27.5 per cent, according to the Switzerland-based Gulf Research Centre.

In total, GCC exports to Africa in 2011 were worth $26.6bn, while imports from the continent were worth $7.2bn, leaving the GCC countries with a healthy trade surplus of $19.4bn that year.

The main product the GCC sells to Africa is fuel, which accounted for about half of all exports to the continent in 2011. This was followed by other goods closely connected to the hydrocarbons sec-tor, such as plastics and fertilisers. Of the trade going the other way, the most significant category is precious stones and metals, worth $1.5bn in 2011, followed by electrical equipment, fruit, and iron and steel.

In the future, food imports from Africa could lift the trade figures much higher, particularly if the GCC countries continue to invest in overseas farmland in their pursuit of food security. Given the size of Africa’s Muslim population, religious tourism, particularly to Saudi Arabia, is another potentially important market.

Currently, just seven sub-Saharan African coun-tries feature among the GCC’s 50 largest trading partners, led by South Africa in 22nd position and

“Just as Gulf economies are reliant on oil, in Africa most exports are drawn from a relatively small list of commodities”

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Mineral fuels, oils and distilla-tion products

other

pearls, precious stones, metals and coins

Machinery, nuclear reactors and boilers

Electrical and electronic equipment

ores, slag and ash 4

Electrical and elec-tronic equipment 2

Vehicles (excluding trains and trams)

58.6 57.7

7.6

28.5

15.1

6.9

11.7

7.9

% %other

Mineral fuels, oils and distilla-tion products

VAlue of Gcc exports to AfricA by country VAlue of Gcc AfricAn imports by country

Source: International trade Centre Source: International trade Centre

30,000

25,000

20,000

15,000

10,000

5,000

0

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

20092009

2010

2010

2011

2011

($m) ($m)

0

5000

10000

15000

20000

25000

30000

0

1000

2000

3000

4000

5000

6000

7000

8000

followed by Kenya, Nigeria, Tanzania, Ethiopia, Uganda and Zambia. The trade between the GCC and those seven countries amounted to close to e13bn ($16.7bn) in 2011, according to figures from the European Commission. The most impor-tant trade links that these and other African coun-tries have with the GCC are with the UAE and

Saudi Arabia, which between them account for 75 per cent of trade. All the GCC countries have a trade surplus with Africa, the smallest being Qatar’s $424m, rising to $7.4bn in Saudi Arabia.

These GCC-Africa trade figures pale in compari-son to Africa’s trade with its most important part-ners. A third of the continent’s trade is with the EU,

UaE UaESaudi arabia Saudi arabiaKuwait KuwaitBahrain Bahrainoman omanQatar Qatar

Growth: In the future, GCC food imports from Africa could lift the trade figures much higher

12-14 Trade.indd 13 4/18/13 3:12 PM

www.meed.com



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“Sukuk issued by African sovereigns could address an investor base in the GCC or at the Islamic Development Bank”Christian Esters, Standard & Poor’s

with a total value of e268.5bn a year, according to the European Commission. The next most impor-tant partners for Africa are China, with e99m of trade; the US with e93bn; India with e41.5bn; and Japan with e21.7bn.

The continent’s strong trade links with the EU are a legacy from the colonial era, when the UK, France, Belgium and other states controlled vast swathes of Africa. Their armies and administra-tors may have largely left, but the trade routes they set up have proved more resilient.

The continent’s investment flows are even more skewed towards the world’s richest coun-tries. According to African Economic Outlook, a partnership between the African Development Bank (AfDB) and the France-headquartered Organ-isation for Economic Cooperation and Develop-ment, the EU and US together accounted for 81 per cent of inward investment into Africa between 2005 and 2010. China, by contrast, accounted for just under 1 per cent. The Middle East provided 6.1 per cent of the total, up from 3.2 per cent in the first half of that decade.

Investment growsThe good news for Africa is that investment is increasing. Foreign direct investment inflows to sub-Saharan countries jumped from $29.5bn in 2010 to $36.9bn in 2011, a level comparable to the peak of $37.3bn achieved in 2008, according to the UN Conference on Trade and Development. The main beneficiaries were Nigeria, South Africa and Ghana, all of which received more than $3bn in 2011. Republic of Congo, Mozambique and Zambia all received between $2bn and $3bn, while Chad, Democratic Republic of Congo, Guinea, Tan-zania and Niger all received more than $1bn.

One further area of investment could open up in the coming years if, as some anticipate, more African countries begin to offer sovereign bonds to international investors. Of particular interest to the GCC countries is sovereign sukuk (sharia-compliant bonds). To date only Gambia and Sudan have issued them, but according to credit ratings agency Standard & Poor’s (S&P), a number of oth-ers are lining up to join them. North Africa is one obvious source, but governments in South Africa, Nigeria, Senegal and Mauritius have also expressed an interest in offering sovereign sukuk.

“We believe that sukuk issued by African sover-eigns could address an investor base in the GCC countries or at the Saudi Arabia-based Islamic Development Bank, which may be looking for sharia-compliant investment opportunities,” says Christian Esters, a primary credit analyst at S&P.

If that happens, it will help to broaden the eco-nomic ties between the Gulf and Africa and per-haps help grow trade as well.Dominic Dudley

GCC trADE wIth AfrICA In 2011 By Country

top 10 GCC ExportS to AfrICA In 2011

top 10 GCC IMportS froM AfrICA In 2011

Source: International trade Centre



15,000

12,000

9,000

6,000

3,000

0

oman

Bahrai

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aitQata

r

Saudi

arabia UaE

($m)

0

3000

6000

9000

12000

15000

total trade trade balance

GCC–AfrICA trADE ($m)

thE GCC’S MAIn trADInG pArtnErS In 2011


Source: European Commission

2009 2010 2011

Total trade 29,476 35,690 33,837

Trade balance 16,441 21,123 19,414

Rank Trade partner Trade ($m) % of total

1 EU 163,983 13.5

2 Japan 147,275 12.2

3 India 136,345 11.3

4 China 127,262 10.5

5 South Korea 103,145 8.5

22 South africa 8,399 0.7

33 Kenya 3,318 0.3

42 Nigeria 1,227 0.1

43 tanzania 1,090 0.1

44 Ethiopia 1,062 0.1

48 Uganda 902 0.1

50 Zambia 748 0.1

GCC exports

GCC exports to Africa

22,958 28,406 26,626

GCC exports to world

427,593 596,038 784,214

Exports to Africa as % of total exports

5.4 4.8 3.4

GCC imports

GCC imports from Africa

6,518 7,284 7,212

GCC imports from world

296,428 330,963 370,244

Imports from Africa as % of total imports

2.2 2.2 1.9

Product groupValue ($m)

Mineral fuels, oils and distillation products

16,955

Plastics and related articles 2,469Fertilisers 578Machinery, nuclear reactors and boilers 564Aluminium and related articles 452Electrical and electronic equipment 432Vehicles (excluding trains and trams) 374Organic chemicals 369Salt, sulphur, earth, stone, plaster, lime and cement

332

Articles of iron and steel 273

Product groupValue ($m)

Pearls, precious stones, metals and coins

1,457

Electrical and electronic equipment 638Edible fruits and nuts 607Iron and steel 538Mineral fuels, oils and distillation products

370

Copper and related articles 288Articles of iron and steel 286Edible vegetables, roots and tubers 252Coffee, tea, mate and spices 232Dairy products, eggs, honey and edible animal products

202

Issue: Africa generally ships cheaper raw materials

12-14 Trade.indd 14 4/18/13 3:11 PM

www.meed.com



UPGRADED LINKS CRUCIAL TO GROWTH Improving its infrastructure can help

Africa lift its economic performance

You do not have to drive far in Africa before you encounter unsealed roads.

According to the World Bank, just 19 per cent of sub-Saharan Africa’s roads are paved. While mov-ing around the rest of the continent, you are often at the mercy of bad weather. This makes it difficult to move goods and people, but Africa’s infrastruc-ture problems are not confined to the quality of its roads. It lags behind other regions of the world in most aspects of infrastructure.

According to the Swiss non-profit organisation World Economic Forum, the continent’s ports are badly run. Measured on a scale from 1-7, from extremely inefficient to extremely efficient, it gives Africa a score of just 3.8. Customs procedures are barely better, with a score of 3.9. The situation is similarly bad among other transport sectors. Rail networks are thin on the ground and air links between capitals and other major cities are often scarce or non-existent.

Inadequate telecomsTelecoms connections are another gap, although the vibrant mobile phone market is at least starting to close the divide with other regions of the world. There are just 12 million phone lines in Africa, according to the Switzerland-based International Telecommunication Union (ITU). That is equivalent to about 1.4 lines for every 100 people, by far the lowest in the world. About 3 million people also have a fixed-line broadband internet connection, a penetration rate of 0.3 for every 100 people, which again ranks as the world’s lowest.

The key to telecoms and communications in Africa is the mobile phone. There are 545 million mobile phone subscriptions, easily outnumbering the number of fixed-line connections. Even so, that still only means a penetration rate of 63.5 per cent, which is below the global average of 96.2 per cent, according to the ITU. Mobile phones also pro-vide a better, cheaper internet link for many peo-ple, with 93 million mobile broadband subscribers.

Additionally, mobile phone and laptop batteries need to be recharged on a regular basis. Yet, the Washington-based World Bank estimates that only a third of the population has access to elec-tricity in sub-Saharan Africa, against a global aver-age of 74 per cent. Access to other utilities is bet-ter, although often still inadequate. Only 65 per cent of the urban population and 38 per cent of the rural population has access to improved water ph

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Inefficient: Only 19 per cent of sub-Saharan Africa’s roads are paved

Logistics

16-18 Logistics.indd 16 4/18/13 3:09 PM


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Sub-Saharan africa’S infraStructure Spending needS ($bn a year)

sources: World Bank; agence Francaise de Developpement

Spending needsCapital

expenditure Operations and

maintenance Total Actual spending

in a yearInformation and communication technology 7 2 9 9Irrigation 2.7 0.6 3.3 0.9Power 26.7 14.1 40.8 11.6Transport 8.8 9.4 18 16.2Water supply and sanitation 14.9 7 21.9 7.6

and sanitation networks, according to the UN Eco-nomic Commission for Africa (ECA).

All this helps to explain why the World Bank ranks African countries far down the list in terms of the ease of doing business. In its latest Doing Business report, which compares 185 economies around the world, the best-ranked country in the region is Mauritius in 19th place, followed by South Africa in 39th and Rwanda in 52nd. Most of the continent languishes in the lower reaches of the table, where 30 of the 50 lowest-ranked coun-tries are African.

This clearly has an impact on the continent’s economy. According to the African Development Bank (AfDB), poor infrastructure reduces busi-ness productivity in Africa by about 40 per cent and amounts to a tax of 2 per cent on annual eco-nomic growth.

“There is a lot that needs to be done,” says a senior international development official. “Some of the challenges of doing business in Africa are that infrastructure is very weak. The total [power] generating capacity of Africa is something like the size of Spain. Only 32 per cent of people in Africa have access to electricity. Just 19 per cent of the roads are paved. There is a major infrastructure challenge and bureaucracy is still a big issue.”

Investment crucialSolving these problems requires massive invest-ment. A widely quoted 2010 report by Vivien Fos-ter and Cecilia Briceno-Garmendia for the World Bank and Agence Francaise de Developpement estimates that $93bn a year is needed over the next decade just to bring Africa’s infrastructure up to the level of other developing regions. Actual spending is about $45bn a year.

AfDB has been doing its bit to try and close the gap. The bank is involved in at least 95 transport projects that are approved or already under way. The vast majority are road projects, although there are some airport, rail and port schemes as well. In 2011, AfDB approved $2.36bn in loans and grants for infrastructure, including transport projects and water supply and sanitation, energy, and information, and communications technology (ICT) programmes.

Within the transport sector, the ongoing projects include two major bridges: the Gambia bridge linking Gambia and Senegal, and the Kazungula bridge linking Botswana and Zambia. A loan has also been approved for the construction of the Lome Container Terminal in Togo to provide a gateway to the landlocked countries of Mali, Niger, and Burkina Faso.

Many AfDB projects contain an element of finance from outside the continent. International involvement is clearly needed, to provide both funding and expertise. The country most closely ph

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afdb financing by Sector, 2011

afDB=african Development Bank. source: international trade centre

infrastructure

social

industry and miningagriculture and rural development

38

4

19

21

117

%Multi-sector

Finance

Issue: Access to sanitation networks is still poor

african development bank activitieS, 2011

eaSe of doing buSineSS rankingS, 2013

hipc=highly indebted poor countries. source=african Development Bank

source: World Bank

Value ($m)Number of

projects

Loans 5,325 60Grants 868 75HIPC initiative 2,025 7Equity participation 80 7Special funds 282 35

EconomyRank (out of 185

economies)Mauritius 19South Africa 39Rwanda 52Botswana 59Ghana 64Namibia 87Zambia 94Uganda 120Kenya 121Cape Verde 122Swaziland 123Ethiopia 127Nigeria 131Tanzania 134Lesotho 136Madagascar 142Mozambique 146Gambia 147Liberia 149Mali 151Burkina Faso 153Togo 156Malawi 157Comoros 158Burundi 159Sao Tome & Principe 160Cameroon 161Equatorial Guinea 162Senegal 166Mauritania 167Gabon 170Djibouti 171Angola 172Zimbabwe 172Benin 175Niger 176Ivory Coast 177Guinea 178Guinea-Bissau 179Democratic Republic of Congo 181Eritrea 182Republic of Congo 183Chad 184Central African Republic 185

“only 32 per cent of people in africa have access to electricity and just 19 per cent of the roads are paved”Senior international development official

(percentage of $6.2bn)


www.meed.com



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“International [aid] in improving Africa’s infrastructure is clearly needed, to provide both funding and expertise”

scheme including overland rail links to South Sudan and Ethiopia.

The investments that do go ahead, however, are vital for the future of the African continent. Improving the region’s infrastructure offers one of the best chances of being able to lift its overall economic performance, and the quality of life of its citizens as well.Dominic Dudley

associated with developing Africa’s infrastructure is China. According to the ECA, from 2001 to 2009, Chinese infrastructure financing commit-ments in Africa reached $14bn. About half of this was channeled towards power projects and the rest into transport and ICT schemes. In 2008, among the top 225 international contractors working in Africa, Chinese firms controlled 42 per cent of the market.

Air linksGCC countries have a far smaller footprint in Africa, but they have been working to address the poor infrastructure, particularly by providing vital air transport links to connect Africa with the rest of the world. The route networks of Qatar Airways, Abu Dhabi’s Etihad and Dubai’s Emirates now reach right across Africa, linking the continent’s cities to Asia and Europe via their Gulf hubs. Emirates has the most extensive network, serving 16 cities in 14 sub-Saharan Africa states from Dubai. Etihad serves four cities, while Qatar Airways flies to 10.

Such route networks mean that, for some inter-national companies, the Gulf can be used as a regional headquarters for Africa. Dubai is the most well-established GCC location for this, with the likes of US hotel group Hilton Worldwide, Dutch electronics giant Philips and US polling firm Gallup using it as their base for the Middle East and Africa region.

In other areas of transport, Dubai-based ports operator DP World operates terminals in Senegal, Djibouti and Mozambique, and Saudi Binladin Group is currently building the Blaise Diagne Inter-national airport in Senegal.

Gulf countries also play a key role in the conti-nent’s telecoms industry. Until recently, Kuwait’s Zain Group was operating in 17 countries across the continent. Although it sold most of its opera-tions in Africa in 2010 to India’s Bharti Airtel for $9bn, it still operates in South Sudan, Sudan and Morocco. The UAE’s Etisalat is active in eight countries around Africa, mostly through its holding in Moov, which is based in Ivory Coast but is also active in Togo, Benin, Niger and elsewhere.

In March this year, Kuwait-headquartered Gulf Investment Corporation, which is owned by the six GCC governments, said it would invest $50m in Virgin Mobile Middle East & Africa, a UK/UAE mobile telecoms firm with operations in South Africa, Oman, Jordan and Saudi Arabia.

Other suggested deals, however, have not been completed. In 2008, Qatar was reported to be in talks with the government of Kenya to build a deepwater port on the island of Lamu in return for a long-term lease of 40,000 hectares of African farmland. Those talks appear to have gone nowhere and no work has yet started on the port, which is part of a wider transport

AfrIcAn DEvElopMEnt BAnk’s DIsBursEMEnts By country, 2011

source: african Development Bank

800

700

600

500

400

300

200

100

0

Botswan

a

camero

onEgy

pt

Ethiop

iagha

na

Maurita

nia

Mauriti

us

Morocco

Nigeria

rwanda

senega

l

south

africa

swazilan

dtun

isia

uganda

Multina

tiona

l

cape V

erde

Equa

torial

guinea

gabon

Madaga

scar

($m)

0

100

200

300

400

500

600

700

800

Air transport: Dubai’s Emirates flies to 16 cities across 14 sub-Saharan Africa countries


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GCC invEstors EyE AfriCAn fArMlAnd Africa’s fertile soil can provide food

security and investment opportunities

large tracts of the Tana River delta in Kenya, in return for building a new port at Lamu. The Abu Dhabi Fund for Development is said to be funding a 28,000-hectare project in Sudan to grow alfalfa, maize, beans and potatoes for export to the UAE.

Riyadh leadsOnce again it is Saudi Arabia that has led the field, with government support for agricultural partnerships with Africa, notably through the state’s King Abdullah Initiative for Saudi Agricul-tural Investment Abroad (KAISAIA).

In 2012, the kingdom’s Agriculture Minister, Fahd Balghunaim, announced that the task of agricul-tural investment abroad would be transferred to a KAISAIA offshoot, the Saudi Company for Agricul-tural Investment and Animal Production (SCAIAP). The firm has capital of SR3bn ($800m), although it is not thought to have disbursed funds yet.

while another Saudi group, Hadco, is reported to have acquired 25,000 hectares of Sudanese crop-land. Last year, Sheikh Mohammed al-Amoudi’s Saudi Star group launched a programme to develop 500,000 hectares of land in Ethiopia, and a small area of this is already in production.

Governments have also been important actors in this process. Qatar agreed a deal to take over

In the capital-rich countries of the GCC, the chronic shortage of rainfall limits the pros-

pects for food production. On the other hand, the African continent has vast agricultural potential but suffers from a shortage of investment.

The complementarity of interests between the Gulf and its economic partners south of the Sahara seems clear, and has been recognised since the late 1990s as governments on both sides explore the scope for deals that could make African land available to Arab investors. However, translating this vision into a mutually beneficial reality has proved a complex challenge.

For GCC states, the key concern has been to ensure security of food supply. Populations in the GCC states are growing fast and traditional local oasis agriculture cannot satisfy the consumption demands of booming societies in the modern era.

GCC constraintsTo mitigate the problem, Gulf governments have encouraged domestic irrigated production. But the potential for this practice is limited by environmen-tal and financial constraints. Natural aquifers in the region are becoming depleted, while using desali-nated water is hugely expensive. The method might be viable for some high-value horticultural crops, but makes little sense for cereals. Saudi Arabia eventually concluded that the large-scale irrigated production of wheat was not a sensible use of lim-ited and highly subsidised water supplies, and the practice is now being phased out.

High oil prices have enabled GCC states to main-tain security of food supply despite rising world prices. But most have felt uncomfortable relying so heavily on the open world market. Over the past 15 years they have explored the scope to invest in land in other regions that have more reliable agri-cultural potential. But it has not always been possi-ble to buy or lease land in countries that are major global grain exporters; big rice producers such as Thailand, for example, impose tight restrictions.

This has led GCC governments to look to Africa, where fertile land and rainfall are in more ample supply than on the Arabian peninsula. Since the 1990s, there has been a steady trickle of announcements about major investments in the continent’s land, often from Saudi Arabia.

In 2009, the Jenat consortium of Saudi agricul-tural firms announced plans for a $40m invest-ment in food production in Sudan and Ethiopia,

“you may see [GCC investors fund] other types of projects in Africa: to share equity or have outgrower schemes”Eckhart Woertz, author

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Choice: Gulf investors can treat African agriculture as an investment focused on the world market

Agribusiness

20-21 Agribusiness.indd 20 4/18/13 3:07 PM


AgriculturAl lAnd

cereAl yield

lAnd used for cereAl crop cultivAtion

Source: World Bank

Source: World Bank

Source: World Bank

60

50

40

30

20

10

0

2,000

1,500

1,000

500

0

10

8

6

4

2

0

Ethiop

ia

Ethiop

ia

Ethiop

ia

Mali

Mali

Mali

Kenya

Kenya

Kenya

Senega

l

Senega

l

Senega

l

Sudan

Sudan

Sudan

Tanzan

ia

Tanzan

ia

Tanzan

ia

(percentAge of lAnd AreA)

(KilogrAms A hectAre)

(millions of hectAres)

0

10

20

30

40

50

60

0

500

1000

1500

2000

0

2000000

4000000

6000000

8000000

10000000

Many of the announced GCC agricultural invest-ments have never been implemented, or even started, on the ground in Africa, says Eckhart Woertz, author of Oil for Food: The Global Food Crisis and the Middle East, a new book examining these issues. “There is a huge discrepancy between amounts projected and amounts actually implemented,” he says.

Moreover, he points out that concrete schemes have been confined to a relatively small number of countries. “Sudan is certainly top of the list, followed by Ethiopia, Tanzania, West Africa, Senegal and Mali,” he says. “Sudan is the most popular country for announcements, but most of the projects have either not started or, if they have started, are at a very early stage of implementation.”

There are several reasons for the gap between ambition and reality. Other than livestock from the Horn of Africa, GCC countries have little track record of importing food from the continent. The GCC’s plans to invest in sub-Saharan agriculture as a source of food crops for home markets have been hindered by the fact that many of the tar-geted African countries have a tropical climate that is not well suited to the cultivation of some of the products most heavily consumed in the Arab world, such as wheat and barley.

These temperate-climate cereals are mainly imported from Canada, the US, Australia, Russia, Ukraine and EU states such as France.

Rice is widely grown in Africa and is a crop that is also heavily consumed in the GCC. At present, most Gulf imports of basmati rice come from Pakistan and India, although Arab investors have now developed some pilot projects in Senegal and Mali for export to the Gulf.

Local challengesA further major hurdle is that local social and political conditions are not always welcoming. Land-lease agreements between Gulf investors or governments and central governments in sub-Saharan Africa are often seen as attempted land grabs by wealthy outsiders.

These deals can be hugely controversial in countries that are poor and where much of the indigenous local population is undernourished. They can spark protests among local popula-tions, local and international media, and non-governmental organisations.

Woertz cites the example of Qatar’s agree-ment with Kenya to take over land in the Tana River valley. “The locals started complaining; there was a lot of resistance by land groups,” he says. “Originally, the scheme was tied to the construction of a port at Lamu, but now the Chinese have got the contract to build the port.”

Land deals with Gulf investors – and other out-siders, including the Koreans – have provoked fears that existing local users such as pastoral-ists or smallholders will be pushed out to make way for big, foreign commercial investors.ph

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Still, Woertz says Arab investors have become more sensitive to these issues. “There is a cer-tain readiness to take these things into considera-tion,” he says. “So, perhaps you may see other types of projects taking place: to share equity or have outgrower schemes.”

Gulf governments and investors have held talks with the UN’s Food & Agriculture Organisation (FAO), which could act as an honest broker in iden-tifying opportunities for agricultural partnerships between the GCC and Africa that would respect the interests of communities on both sides.

But the realisation of such an approach presents complex challenges.

Woertz points out that Saudi Arabia’s strategic goal remains the production of food for its domes-tic consumption. Indeed, those Saudi agricultural firms that have been looking at investment in Africa expect to enjoy substantial subsidies from the kingdom’s authorities. This is because their role would be to produce food to replace the out-put of the domestic cereals programme that is now being wound up for environmental reasons.

The cereals scheme was massively subsidised, says Woertz. “The direct costs of subsidies for the Saudi wheat program were $85bn between 1984 and 2000. This was equivalent to 18 per cent of Saudi Arabia’s $485bn in oil revenues dur-ing that period.”

Rethinking strategyAnother option is to treat African agriculture as essentially an investment; a business proposition focused on the world market rather than a means of satisfying Gulf demand for food imports.

This is a strategy being pursued by Hassad Foods, an arm of Qatar Holding, which is part of the emirate’s sovereign wealth fund, Qatar Invest-ment Authority. Hassad’s publicity material says: “While all investments are there to generate prof-its, they also exist to fulfil certain needs to support the food security programme when required.”

But such an approach can pose tough chal-lenges for GCC investors, who mostly lack experi-ence in producing or marketing tropical cash crops and risk finding themselves in direct compe-tition with long-established sub-Saharan and Western players. They will often need to recruit foreign sector specialists to actually establish and run the projects for them.

Even so, some have taken on the challenge. In 2011, Saudi-based Menafea Holdings revealed plans to invest $125m in a new pineapple farm and processing plant in Zambia.

The GCC is short on food, but rich in cash. African nations are fertile and need money. As ties between the Gulf and Africa strengthen, investment in agriculture is likely to grow.Paul Melly

20-21 Agribusiness.indd 21 4/18/13 3:07 PM

www.meed.com



GULF FocUsEs on AFricAn MinErALs The sector has grown more appealing

due to the high commodities prices

toughest jurisdictions, with big minerals deposits found in conflict zones, which include eastern DRC, Mali and Central African Republic, fragile states such as Sierra Leone, Guinea and Liberia, and controversial countries such as President Robert Mugabe’s Zimbabwe.

Difficulties working with South Africa’s fractious labour unions and political class, amid an ongoing nationalisation debate, have discouraged invest-ment in SSA’s biggest economy, which held about $2.5 trillion-worth of non-energy mineral wealth, according to an estimate by global consultancy firm Deloitte in 2010.

Wealth of resourcesAll the countries mentioned above have abundant precious metals resources. According to the World Bank, as of 2010, Guinea represented more than 8 per cent of total world bauxite production, Zam-bia and DRC had a combined 6.7 per cent share of world copper production, and Ghana and Mali together accounted for 5.8 per cent of gold output.

In tapping these resources, Gulf-based compa-nies are small-scale players compared with SSA’s traditional European partners and China, which received some 19.3 per cent of SSA’s exports in 2010 – mainly minerals and hydrocarbons – up from 5 per cent a decade ago. Following Xi Jinping’s

Resource prospecting and exploration remains particularly active in East and West Africa, provid-ing a significant part of the $63bn-plus FDI flows that came into the region in 2011-12, according to World Bank figures. The bank has calculated that economic rents from minerals (including oil, gas and mining) in SSA exceeded $169bn in 2010. However, this was out of a world total of $2.4 trillion and, given the region’s world-scale reserves of most known minerals, much more rev-enue could be generated.

The continent’s growth owes much to an improvement in its geopolitics and security since the blood-soaked, coup-prone 1980s and 1990s. Among its fastest-growing economies are Sierra Leone and other mineral-rich, post-conflict econo-mies. But SSA still contains some of the world’s

It is little surprise to see a variety of Gulf interests looking towards sub-Saharan

Africa (SSA) as investors worldwide seek above-average rates of return, and natural resources attract firms looking to secure vital energy and minerals inputs, and benefit from historically high commodities prices.

As a whole, SSA’s gross domestic product (GDP) grew at nearly 5 per cent in 2011/12, but one-third of its countries produced much higher GDP num-bers. The Washington-based World Bank says, “a number of the fastest-growing economies in the region are buoyed by new mineral exports – [for example] iron ore in Sierra Leone, and uranium and oil in Niger”.

Commodity prices are notoriously volatile, but economies have become more resilient to down-turns, says Shantayanan Devarajan, World Bank chief economist for Africa. Foreign direct invest-ment (FDI) “is showing signs of becoming more long-term”, he says. “It is now more than aid, and this is despite expectations that commodities prices will go down” from their recent peaks.

Increasing competitionThis is helped by competition for resources, led by China’s voracious market but including many other players. Ras al-Khaimah’s RAK Minerals & Metals Investments has registered a local ven-ture, Premiere Miniere du Katanga, in Democratic Republic of Congo (DRC) to explore more than 2,770 square kilometres in Katanga province, a copper and cobalt hub.

A few Gulf conglomerates are in multiple juris-dictions. Kuwait’s Kharafi Group is in Sudan, hav-ing purchased a small stake in the Chinese-led Petrodar Operating Company from Dubai-based Al-Thani Investments. It has done construction work in Tanzania, owns hotels in Gambia, and has offices in countries as diverse as Botswana, Lesotho, Mozambique, Kenya, Eritrea, Senegal and Niger. More are looking, with plans to include minerals projects in their portfolios.

“We are now looking actively at the African energy and minerals frontiers as [an area] to place our money in a new investment fund,” says the rep-resentative of a Saudi-owned, Dubai-based private office. He has been prospecting potential deals in Johannesburg, which has long been a hub of the African mining industry and is now actively promot-ing itself as “the capital of African business”.

“We are now looking at the African energy and minerals frontiers to place our money in a new investment fund”Representative of Saudi-owned private office

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Major player: Dubai has emerged as an important hub for the processing and sale of raw diamonds

Minerals

22-23 Minerals.indd 22 4/18/13 3:06 PM


AFRICA OIL AND NATURAL GAS RENTS, 2010*

AFRICA OTHER MINERALS RENTS, 2010

*=Resource rent: the difference between revenue and the cost of extraction; GDP=Gross domestic product. Source: World Bank

GDP=Gross domestic product. Source: World Bank

AFRICA RESOURCE EXPORTS, 2011*

Note: Reports data are estimates or projections; *=Resource rent: the difference between revenue and the cost of extraction; Eq. Guinea=Equatorial Guinea; R. Congo=Republic of Congo; DR Congo=Democratic Republic of Congo. Sources: IMF reports; World Bank

100

90

80

70

60

50

40

30

20

10

0

AngolaCha

dNige

ria

Eq. G

uineaSud

anGab

onGuin

ea

R. Con

go

Zambia

DR Congo

Maurita

nia Mali

Namibia

Ghana

Camero

on

Ivory

Coast

Botswan

a

Mozambiq

ue

(PERCENTAGE OF TOTAL EXPORTS)

0

10

20

30

40

50

60

70

80

extensive fi rst visit to the continent as China’s new president in March 2013, which yielded another 20 economic and trade co-operation agreements, Zhong Manying, a senior Chinese Commerce Min-istry offi cial, said Chinese FDI in Africa rose by 70 per cent in 2012 to reach $2.9bn.

A major complaint voiced by African politicians, business leaders and advocacy groups is that resources are often secured by foreign investors and leave the continent as quickly as is feasible. Cynics observe this may not be very fast, given the continent’s lack of adequate transport infra-structure. Some big Gulf players, such as Qatar Steel Company, which examined an iron ore project in Mauritania, have expressed interest but have stepped back.

According to Zhong, China is investing more to process minerals within Africa and raise levels of local content. Western resources companies also say they are sensitive to these demands, which increasingly are written into law. But extraction, with some token local content, is likely to remain most attractive to investors who do not want big upfront spending commitments for long-term projects.

Local processingThis is despite efforts to increase the proportion of natural resources that are processed in the continent. Deloitte has said that while South Africa was one of the world’s wealthiest mining jurisdictions, it “continues to export most of its minerals as ores or semi-processed minerals rather than high-value intermediate-to-fi nished products”. The country’s president, Jacob Zuma, has been pushing a benefi ciation strategy. “We can start reaping the full benefi ts of our commodi-ties,” he told parliament.

“We are looking for investors who can provide more benefi ciation of natural resources,” said Amar Sooklal, deputy director at the South African Department of Trade & Industry, in April.

The situation is more dramatic in the continent’s less-developed, but most extravagantly endowed mining jurisdictions. DRC is estimated to hold deposits of a majority of known minerals. These resources have been fought over by rival groups, while deals involving local warlords – but also Presi-dent Joseph Kabila Kabange and business associ-ates led by Israeli magnate Dan Gertler – have been investigated by a special UN panel and advo-cacy groups, including London-based Global Wit-ness, that specialise in confl ict diamonds, sales of illegal coltan (essential for mobile phones and mainly found in the Kivu regions) and other abuses.

Low levels of benefi ciation mean minerals-rich countries fail to create jobs and maximise their earnings. Devarajan bemoans the fact that in a majority of Africa’s resource-rich countries, the decline in poverty has been slower than in econo-

mies that lack natural resources. The percentage of the population living in extreme poverty actually increased during the commodity price boom in Angola, Republic of Congo and Gabon.

Dubai has understood the potential offered by African minerals industries. An increasing number of South African fi rms are establishing a presence there, “because we have seen that it is a hub that can tie us into our growing and future market, Asia”, says a banker based in Johannesburg.

While raw diamonds traditionally went to Ant-werp for processing and sale, Dubai has emerged as an important hub for that business. Botswa-na’s Minerals, Energy and Water Resources Minis-ter Kitso Mokaila recently asked whether the major southern African diamonds producer should use the Dubai Diamond Exchange (DDE) as a model for its own development.

The DDE was founded in 2005 “to provide pre-cious stones fi rms a platform from which to trade, network and grow their businesses”. The DDE says it provides services to more than 500 companies, including Luxembourg-based diamond giant DeBeers, from the Almas Tower, which also houses the region’s only offi ce managing the Kimberley Process Certifi cation Scheme (KPCS).

The Kimberly Process was introduced to control the sale of confl ict diamonds; Dubai strenuously argues that it follows best practice, countering claims that minerals of dubious provenance are marketed through the emirate. The Dubai Multi Commodities Centre Authority is the only offi cial entry and exit point for rough diamonds in the UAE.

Controversial industryBut dealing in diamonds is a volatile business. Reports about growing sales of Zimbabwean rough diamonds through Dubai to the alleged bene-fi t of Mugabe’s inner circle have implied sanctions-busting, even though the sales are not illegal. Min-erals Marketing Corporation of Zimbabwe chairman Christopher Mutsvanga told the Financial Times in early April that “Dubai was our saviour”, after the fi rm came under US and EU sanctions. Dubai Multi Commodities Centre executive chairman Ahmed bin Sulayem was quoted by Zimbabwean media in April as saying the West was mistaken in maintain-ing sanctions on the precious metals industries, denying Zimbabwe its “lifeblood”.

African minerals offer big profi ts, but contro-versy is never far away.Jon Marks and Eleanor Gillespie

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� Jon Marks is editorial director of London-based analyst African Energy (www.africa-energy.com) and Eleanor Gillespie is research director of parent company Cross-border Infor-mation (www.crossborderinformation.com).

(% OF GDP)

(% OF GDP)

21–40

21–30

< 7

< 10

41–65

31–60

8–20

11–20

Resource-rich oil Resource-rich non-oil

22-23 Minerals.indd 23 4/18/13 3:05 PM

www.meed.com



evaluation rights for a gas discovery. Kufpec now holds a 46.15 per cent stake in Marine block 9 in Republic of Congo and 10-15 per cent stakes in a range of E&P interests in Mauritania.

However, probably the most complex African challenge in political and business terms is pre-sented by southern Sudan’s Block B. France’s Total held the lead interest in this vast, potentially promising zone, with Kufpec owning a 27.5 per cent stake. But the block lies in a region that was at the heart of the protracted conflict between the central Sudan government and southern Sudan independence fighters; because of the security problems, for two decades it was impossible to safely sustain an exploration programme.

But after it gained independence in 2011, and with security conditions much improved, South Sudan became keen to see this potentially rich resource asset developed. Late last year, it pro-posed breaking up Block B, allocating a third to Total, with the other sections possibly allocated to Kufpec and the US’ ExxonMobil; there were also rumours that new investors might be invited to ten-der. No final decisions have yet been taken and the outlook for Kufpec in Block B remains unclear.

Recent years have seen a shift in the focus of Kufpec’s activity towards North Africa and the Asia-Pacific region. South of the Sahara, its footprint has become less marked, but this may be partly the coincidental result of regulatory or exploration developments in various unconnected countries.

While it may be a trailblazer, Kufpec has not been entirely alone in looking to Africa. The Ras al-Khaimah Gas Commission has been involved in exploration work in Tanzania, while Dubai’s Emir-ates National Oil Company (Enoc) has invested in oil storage facilities in Djibouti and Mozambique.

In 2006, Qatar-based Venessia Petroleum was contracted to develop the Malawian energy sec-tor. In 2009, it signed terms for the development of an oil pipeline from Beira to Malawi.

Focused mainly on their huge domestic energy resources, Gulf oil companies have

been slow to look to sub-Saharan Africa. But that could change as they seek to diversify their pro-duction interests, particularly as fresh opportuni-ties open up in a new generation of oil-producing African countries.

The emergent oil and gas sector in East Africa – for many decades hardly on the agenda of interna-tional hydrocarbons investors – could offer partic-ularly interesting opportunities.

With sector expertise and ample capital resources, Gulf energy groups could be well placed to act as joint venture partners in new exploration and production (E&P) projects, even if they often lack the personnel and local infra-structure to take on lead operating roles.

Kuwaiti pioneerA pioneer in this field has been Kuwait Foreign Petroleum Exploration Company (Kufpec), which first ventured south of the Sahara in 1985, taking a stake in Block B in southern Sudan. By 1991, it also held an interest in the offshore Yombo field in Republic of Congo, operated by the US’ Amoco using floating production, storage and offloading vessels. Although Kufpec held only a 6.25 per cent interest in a relatively small heavy oil field, with initial output flows of only 6,000 barrels a day (b/d), the investment signalled the company’s readiness to become involved in territories far beyond the usual geographical comfort zone for Middle Eastern investors.

Over the past two decades, as a subsidiary of state-owned Kuwait Petroleum Corporation, Kuf-pec has fulfilled a specialised international role. It has functioned on a relatively tight budget and with few staff, analysing numerous opportunities for investing in E&P projects around the world, both in established major oil exporting countries and in secondary terrain where there are niche opportunities in which to hold stakes.

Over time, Kufpec has held a varied spread of sub-Saharan interests. But the company pursues a proactive investment strategy and is not afraid to withdraw from ventures when targeted opportu-nities for development do not materialise. For example, in Ivory Coast, it relinquished its stake in Block 102 in 2011, at the end of the first explora-tion period, and pulled back from another interest too, after the authorities opted against granting

AFRICAN OIL dRAws GULF INvEstORs The continent could become the

next energy frontier for GCC firms

As Africa continues to develop its energy resources, it is likely that more GCC companies will follow Kufpec in bringing their expertise to bear on a rich, but often underexploited continent.Paul Melly

KUFpEC’s AFRICAN vENtURE stAKEs

Kufpec=Kuwait Foreign Petroleum Exploration Company; b/d=barrels a day; R. Congo=Republic of Congo. Source: Kufpec Annual Report 2011

Country Block % of ownership StatusSouth Sudan Block B 27.5 Talks under wayIvory Coast Block CI 24 33.7 Withdrew in 2011

Block CI 102 27 Withdrew in 2011Mauritania PSC A 13.1 Renewed and combined in 2011 as Block C-10 on new terms

but with discoveries kept as separate exploration areasPSC B 11.6Chinguetti EEA 10.2 In production: net output in 2011 was 626 b/d

R. Congo Marine Block 9 46.1 Interest increased after withdrawal of a joint venture partner

OIL pROdUCtION

pROvEN CRUdE REsERvEs

Source: BP

Source: BP

2,500

2,000

1,500

1,000

500

0

50

40

30

20

10

0

Algeria

Algeria

Angola

Angola

Republ

ic of C

ongo

Republ

ic of C

ongo

Egypt

Egypt

Gabon

Gabon

Libya

Libya

Sudan

, Sout

h Suda

n

Sudan

, Sout

h Suda

n

Other A

frican

countr

ies

Other A

frican

countr

ies

Chad

Chad

Equa

torial

Guinea

Equa

torial

Guinea

Nigeria

Nigeria

Tunisia

Tunisia

(thOUsANd bARRELs A dAy)

(bILLION bARRELs)

0

500

1000

1500

2000

2500

0

10

20

30

40

50

Energy

24 Energy.indd 24 4/18/13 3:04 PM

THE MOST

EXCITING AFRICAN

BRAND

WWW.MARA.COM

Mara_Meed_Advert 1 17/04/2013 15:21

www.meed.com



Informa believes Africa could have as many as 1.19 billion mobile subscriptions just four years from now. Nigeria, with 100 million, could see the total reach as high as 169 million. Even if reality falls short of these forecasts, the growth rate is still likely to be impressive. However, despite the business potential, the level of

Telecommunications, specifically mobile telecommunications, is one of the few sec-

tors in which Gulf countries have been major play-ers in Africa’s sub-Saharan economy.

In 2005, Kuwait’s Zain spent $3.4bn acquiring Celtel, a significant stakeholder in the African mar-ket. By investing a further $10bn, it transformed itself into the third-largest mobile phone service provider in Africa. Present in 15 countries, the firm offers its services free of normal roaming con-straints. Etisalat has also made important inroads, while another UAE-based company, Warid Telecom, broke into the Congolese market.

In contrast to sectors such as agriculture, where the GCC countries’ relevant expertise is limited, the telecoms sector is one where the Gulf is among the emerging market leaders. The move into Africa has played to the GCC telecoms sec-tor’s strengths: experience in service delivery, technology and marketing.

Moreover, for companies based in countries with small populations, such as the UAE and Kuwait, sub-Saharan countries offer huge poten-tial for expansion. At one stage, Zain estimated its potential African market at 400 million people.

Huge potentialThe interest of GCC groups in Africa is under-standable. The continent is one of the fastest growing markets for mobile telecoms, in part because of the development backlog that it suf-fers in other sectors.

Mobile phones are cheap and they can have a transformative impact not only on how people keep in touch for personal and business reasons but also on the operation of the economy. Most Africans have no access to fixed-line telecoms, broadband internet or formal sector banking. But, phone companies have now developed services that allow people to check on the prices of crops and animals, so they can decide whether to take them to market. In some cases, mobile services effectively substitute for banking and payment structures also.

According to research by the UK’s Informa Tele-coms & Media, Africa is now the world’s second-largest mobile market. With more than 760 mil-lion mobile subscriptions it still has continued scope for growth as market penetration of mobile services has only reached 68 per cent, compared with a global average of 91 per cent. ph

oto

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AfricAn tElEcoMs to witnEss booM The continent is one of the fastest

growing markets for mobile providers

“According to research by the UK’s informa telecoms & Media, Africa is now the world’s second-largest mobile market”

engagement by Gulf operators has not always been sustained.

Zain upgraded networks, acquired extra licences and eventually covered Burkina Faso, Chad, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia. This gave it a strong presence in central Africa and the east African Common Market for Eastern and Southern Africa (Comesa) markets. By mid-2010, it had 40 million sub-Saharan customers. How-ever, by this stage Zain had decided to sell its sub-Saharan assets to India’s Bharti Airtel. The $10.7bn disposal was completed in June 2010.

Etisalat leads The only sub-Saharan markets in which Zain remains present are Sudan and South Sudan; in the latter it is the market leader. The group’s retreat has left Etisalat as the clear forerunner among GCC telecom players south of the Sahara. The UAE operator is a substantial force in Nigeria, where it has 14 million subscribers and a reputa-tion for service innovation.

In Tanzania, Etisalat owns Zantel, a major pro-vider of broadband and wireless internet services as well as mobile telecoms. In West Africa, it is the majority shareholder in Atlantique Telecom, which is headquartered in Ivory Coast, one of the most important economies in the region. Partly through its subsidiary, Moov, Etisalat also oper-ates in Benin, Burkina Faso, Togo, Niger, Central African Republic and Gabon.

In Sudan, Etisalat is a founding partner of the fixed-line service provider Canar. It has also held a stake in Sudatel, which is a major player in the local mobile market, and in Senegal and Mauritania.

Meanwhile, Wardi Telecom, owned by Etisalat, provides mobile services in Republic of Congo and Uganda. In the latter, it provides not only phone cov-erage but also fixed and mobile data services and an electronic money deposit, transfer and payment service, which is particularly useful for Ugandans who do not have a conventional bank account.

The continent of Africa represents a massive growth market for telecoms companies, and Etis-alat is leading GCC investment in the sector. But with a growing young population needing to stay connected, there will be plenty more investment opportunities ahead.Paul Melly

sUb-sAHArAn AfricA cEllUlAr sUbscriptions

rep congo=republic of congo. source: World Bank

150

120

90

60

30

0

angola

Burund

iBen

in

Botswan

a

camero

on

rep con

go.gha

na

Maurita

nia

rwanda

senega

l

tanzan

ia

uganda

Ivory

coast

Nigeria

south

africa

(pEr 100 pEoplE)

0

30

60

90

120

150

2010 2011

Linked: Farmers can check crop costs on mobiles

telecoms

26 Telecoms.indd 26 4/18/13 3:03 PM

www.meed.com



currEnt Gross DoMEstic ProDuct (GDP), 2011

($m)

thousAnD PEoPlE

% of GDP

($)

totAl PoPulAtion, 2011 Gross nAtionAl incoME PEr cAPitA, 2010

currEnt Account bAlAncE, 2011

34,613–378,135

32,273–162,471

8.82–13.49

12,566–14,540

633–5,408

501–8,574

2.27–5.44

1,030–2,149

0–252 -56–-8.68

170–329

No data

No data

No data

No data

5,409–34,612

8,575–32,272

5.45–8.81

2,150–12,565

253–632 -8.67–2.26

330–1,029

Key economic indicators

28 Data Maps.indd 28 18/04/2013 15:37


GDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development Bank



GDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development Bank GDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development Bank




Burundi

dEMOCrATiC rEPuBLiC OF COnGO

EThiOPiA

MAdAGAsCAr MALAwi

KEnyA

EriTrEA

COMOrOs

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 7.8 8 8.2 8.4 8.6 8.8 9

Nominal GDP ($bn) 1.4 1.6 1.7 2 2.4 2.5 2.9

GDP per capita ($) 174 202 213 242 275 288 317

Real GDP growth (annual change, %)

4.8 5 3.5 3.8 4.2 4.2 4.5

Total government debt (gross, % of GDP)

128.5 111.5 36.9 36.7 35.3 31.6 28.5

Current account balance (% of GDP)

-5.4 -1 1.8 -9.4 -11.4 -11.4 -10.7

Economically active population (million)

3.7 3.9 4 4.2 4.3 na na

Inflation (%) 14.4 26 4.6 4.1 14.9 14.7 8.4

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 64.5 66.4 68.4 70.5 72.6 74.7 77

Nominal GDP ($bn) 10 11.6 11.1 13.1 15.7 17.7 19.3

GDP per capita ($) 156 175 162 186 217 237 251


6.3 6.2 2.8 7.2 6.9 7.1 8.2


126.1 133.1 136.4 35.1 29.9 32.3 34.7


-1.1 -17.5 -10.5 -8.1 -11.5 -12.5 -14.3


21.8 22.6 23.4 24.2 24.9 na na

Inflation (%) 16.7 18 46.2 23.5 15.5 10.4 9.5

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 78.6 80.7 82.8 84.8 86.8 88.9 91.1

Nominal GDP ($bn) 19.6 26.6 32.3 29.7 31.7 41.9 47.1

GDP per capita ($) 249 330 389 350 365 471 518


11.8 11.2 10 8 7.5 7 6.5


36.8 30.5 25.1 27.6 25.9 22.2 23.2


-4.5 -5.6 -5 -4 0.6 -6.1 -7.7


35.7 36.8 38 39.3 40.6 na na

Inflation (%) 17.2 44.4 8.5 8.1 33.1 22.9 10.2

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 19.7 20.2 20.8 21.3 21.9 22.4 23

Nominal GDP ($bn) 7.3 9.4 8.6 8.7 9.9 10.1 10.5

GDP per capita ($) 373 466 412 410 453 449 458


6.2 7.1 -4.1 0.4 1.8 1.9 2.6


44.5 45.2 62.2 64.4 59.1 58.7 57.2


-12.7 -20.6 -21.2 -9.7 -6.9 -7.9 -8


8.8 9.1 9.4 9.7 10.1 na na

Inflation (%) 10.4 9.2 9 9.3 10 6.5 7


Nominal GDP ($bn) 3.6 4.3 5 5.4 5.6 4.5 4.5

GDP per capita ($) 253 288 330 343 347 270 262


9.5 8.3 9 6.5 4.3 4.3 5.7


32.4 41.2 40.1 35.1 40.5 49 43.6


1 -9.7 -4.8 -1.3 -5.9 -4.1 -1.4


5.7 5.9 6.1 6.3 6.5 na na

Inflation (%) 8 8.7 8.4 7.4 7.6 17.7 16.2


Nominal GDP ($bn) 27.2 30.5 30.6 32.2 34.1 41.8 49.8

GDP per capita ($) 749 813 793 810 833 994 1,150


7 1.5 2.7 5.8 4.4 5.1 5.6


46 45.6 47.5 49.9 48.5 47.2 45.3


-4 -6.6 -5.8 -6.5 -10.6 -8.5 -8.6


13.5 14 14.4 14.9 15.3 na na

Inflation (%) 4.3 15.1 10.6 4.1 14 10 5.8

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 4.9 5 5.2 5.3 5.5 5.7 5.8

Nominal GDP ($bn) 1.3 1.4 1.9 2.1 2.6 3.1 3.5

GDP per capita ($) 272 276 360 398 475 549 606


1.4 -9.8 3.9 2.2 8.7 7.5 3.4


156.7 174.9 145.7 144.8 133.8 125.8 123.7


-6.1 -5.5 -7.6 -5.6 0.5 2.1 2


2.3 2.4 2.5 2.5 2.6 na na

Inflation (%) 9.3 19.9 33 12.7 13.3 12.3 12.3


Nominal GDP ($bn) 0.5 0.5 0.5 0.5 0.6 0.6 0.6

GDP per capita ($) 744 834 823 818 903 858 898


0.5 1 1.8 2.1 2.2 2.5 3.5


74.6 68.8 51.9 49.2 44.7 40.5 36.8


-5.7 -10.9 -7.8 -7 -9.5 -10.4 -9.6


0.2 0.2 0.2 0.2 0.2 na na

Inflation (%) 4.5 4.8 4.8 3.9 6.8 5.6 3.1

Economic indicators for sElEctEd comEsa countriEs

29-30 Data.indd 29 4/18/13 3:01 PM

www.meed.com




GDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development BankGDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development Bank


GDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development BankGDP=Gross domestic product; f=Forecast; na=Not available. Sources: IMF; African Development Bank



MAuritius

sudAnsEychEllEs

ugAndA

ZiMbAbwEZAMbiA

swAZilAnd

rwAndA


Nominal GDP ($bn) 7.8 9.6 8.8 9.7 11.3 11.9 12.4

GDP per capita ($) 6,160 7,598 6,919 7,575 8,742 9,199 9,541


5.9 5.5 3 4.2 4.1 3.4 3.7


47.3 44 50.7 50.6 50.9 52 51.4


-5.4 -10.1 -7.4 -8.2 -10.3 -10.5 -9.1


0.6 0.6 0.6 0.6 0.6 na na

Inflation (%) 8.6 9.7 2.5 2.9 6.5 4.5 5.2


Nominal GDP ($bn) 45.9 54.1 52.8 64.9 64 51.6 47.3

GDP per capita ($) 1,235 1,419 1,351 1,616 1,959 1,539 1,377


12.2 2.3 4.6 2.2 -4.5 -11.2 0


76.7 69.4 72.5 74 74.1 112.1 116.3


-5.9 -2 -10 -2.1 -0.5 -7.8 -6.6


12.2 12.6 13 13.4 13.8 na na

Inflation (%) 8 14.3 11.3 13 18.3 28.6 17


Nominal GDP ($bn) 1 1 0.8 1 1 1 1

GDP per capita ($) 12,219 11,067 9,637 10,727 11,204 10,572 11,241


9.9 -1 0.5 6.7 5.1 3 3.5


130.1 130.7 124.4 82.5 77.4 86.5 80.2


-15.3 -20.2 -9.8 -20.1 -21.5 -19.9 -19.5


na na na na na na na

Inflation (%) 5.3 37 31.7 -2.4 2.6 7.5 4.5


Nominal GDP ($bn) 12.9 15.9 16 17 17.4 20.5 21.7

GDP per capita ($) 424 506 495 508 505 574 590


8.6 7.7 7 6.1 5.1 4.2 5.7


23.6 22.1 22.2 27 33.3 36.2 38.9


-2.9 -5.7 -9.4 -10.2 -11.4 -11 -11.7


11.7 12 12.5 12.9 13.3 na na

Inflation (%) 6.1 12 13.1 4 18.7 14.6 6.1


Nominal GDP ($bn) 5.6 4.7 6.1 7.4 9.5 10.8 12.3

GDP per capita ($) 451 372 488 591 752 858 978


-3.8 -18.3 6.3 9.6 9.4 5 6


61.8 87.5 91.3 56.6 66.9 61.5 58.6


-6.7 -21.6 -22.2 -28.8 -36.2 -20.4 -20


6.2 6.2 6.2 6.3 6.4 na na

Inflation (%) na na 6.2 3 3.5 5 5.7


Nominal GDP ($bn) 11.5 14.6 12.8 16.2 19.2 20.7 23.1

GDP per capita ($) 937 1,160 990 1,221 1,414 1,486 1,622


6.2 5.7 6.4 7.6 6.6 6.5 8.2


26.7 23.5 26.9 25.8 26 28 28.5


-6.5 -7.2 4.2 7.1 1.2 -1.8 -1.1


4.9 5 5.2 5.3 5.4 na na

Inflation (%) 10.7 12.4 13.4 8.5 8.7 6.4 6.2


Nominal GDP ($bn) 2.9 2.8 3 3.7 4 3.7 3.6

GDP per capita ($) 2,559 2,432 2,500 3,131 3,384 3,119 3,069


2.8 3.1 1.2 2 0.3 -2.9 -1


18.4 16.6 12.6 15.9 15.4 22 29.4


-2.2 -8.2 -14 -10.5 -9.1 0.1 -5.4


0.4 0.4 0.4 0.4 0.4 na na

Inflation (%) 8.1 12.7 7.4 4.5 6.1 7.8 6.9

2007 2008 2009 2010 2011 2012f 2013fPopulation (million) 9.4 9.6 9.8 10 10.2 10.4 10.6

Nominal GDP ($bn) 3.7 4.7 5.2 5.6 6.3 7 7.7

GDP per capita ($) 399 489 533 559 620 667 723


5.5 11.2 4.1 7.2 8.6 7.7 7.5


26.9 21.4 23 23.2 24 25.8 24.3


-2.2 -4.9 -7.3 -5.9 -7.3 -9.8 -9.9


4.6 4.8 4.9 5.1 5.2 na na

Inflation (%) 9.1 15.4 10.3 2.3 5.7 7 6.1

29-30 Data.indd 30 4/18/13 3:00 PM

Aerial view of Dubai World Central’sAl Maktoum International Airport &

Aviation District. December, 2012

dwc.ae

a 140km ²

A strategic initiative of the Government of Dubai, Dubai World Central is

purpose-built aerotropolis. Comprised of eight districts, DWC is intelligently designed as a powerful economic platform for aviation, logistics and other competitive businesses to grow and expand their operations.

With leading companies seizing the opportunity to invest and capitalize on dynamic markets, DWC is reflective not just of Dubai’s visionary ethos but also of its determination to make its vision into a profitable reality.

IT’S NOT JUST VISIONEERING, IT’S A REALITY.

C

M

Y

CM

MY

CY

CMY

K

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