Continent the last frontier and comes with high risk but also promise of sizeable returns
UAE companies and sovereign wealth funds including DP World and Investment Corporation of Dubai (ICD) are keener than ever to invest in Africa, betting that the high risks associated with the continent will pay off with outsize returns. DP World, which already has five operations in Africa, including in Egypt, Djibouti and Senegal, wants to forge ahead with more investments despite a legal battle to keep hold of its concession to run Djibouti’s container terminal after the government accused it earlier this year of using bribery to win the contract, said the chairman, Sultan Ahmed bin Sulayem. Etisalat, the biggest telephone company in the UAE; Dubai Islamic Bank, the emirate’s biggest Sharia – compliant lender; and RAK Ceramics are also among UAE companies that have existing business in Africa or are planning to make new investments there. Mr Sulayem said he planned to make additional investments in Senegal, where DP World, one of the world’s biggest port operators, has a good relationship with the new democratically elected government, and would like to find business opportunities in other African countries including Nigeria. “We look at the opportunities and they are unparalleled,” Mr bin Sulayem said. “Infrastructure is vital and there are challenges including effective and well-applied corporate governance. The continent needs foreign investment, which will only come if there is robust legal, regulatory and physical infrastructure. No one country can develop in isolation from its neighbours and the wider region. Connectivity is vital to open markets, grow trade and thereby grow economies.” African presidents from Ethiopia, Rwanda and Ghana as well as businessmen including the billionaire Aliko Dangote sought yesterday at the Global Africa Forum in Dubai to encourage foreign investors to come and invest in infrastructure, power and industrial projects – and make bigger returns than elsewhere while helping to propel the poorest continent to prosperity. Foreign investment into Africa is expected to rise to more than US$80 billion this year following years of lower interest in the continent after the financial crisis, according to analysts.
“Investment from the private sector is essential for African growth, as the continent’s governments have been incapable of managing these large-scale projects and should instead focus their efforts on the education and health sectors,” said Mr Dangote. “Africa offers huge potential for companies looking to invest, as a large market with almost $1.4 trillion in consumer spending.”
Home to one of the world’s fastest growing populations and middle classes, Africa is the last global frontier of investment and in recent years has attracted much attention from investors as many war-torn nations there heal. Yet so far many foreign investors would prefer to buy shares of banks in Africa to get hassle-free exposure to the broader economy rather than get entangled in the kind of problems encountered by DP World in Djibouti when investing directly, noted Stephen Schwarzman, the chairman and chief executive of the private equity firm Blackstone, who was also at the conference.
The UAE’s geographic proximity, existing ties with the continent and status as one of the world’s biggest trading hubs make it particularly well placed to give it a head start in the new scramble for Africa, officials and executives said. The annual volume of trade between the UAE and Africa is growing at a triple-digit rate, and the UAE is Africa’s biggest trading partner in the Arabian Gulf, said Hamad Buamim, the president of the Dubai Chamber of Commerce. ICD, which spent $ 300m last month to buy a 1.4 per cent stake in Dangote Cement, said it was open to making more investments with Dangote Group as a way to increase its investment exposure to Africa.
“We have been looking at Africa for a long time,” said ICD’s chief executive, Mohammed Al Shaibani. “We are looking to do more business with Mr Dangote and we have some things that we are exploring at the moment together.”