The importance of Africa to the UAE growth story

The importance of Africa to the UAE growth story

Why the UAE-Africa trade relationship is growing so fast, and how it could link the continent to the rest of the world

The importance of Africa to the UAE growth story

The Dubai Chamber of Commerce and Industry had an announcement to make at the Global Business Forum on Africa, the largest event of its kind hosted outside of the continent, held in Dubai at the beginning of November.

The government body said it will invest AED100m ($27m) to raise awareness of trade and investment opportunities in Africa, and promote Dubai as an attractive business hub for companies on the continent.

While that is a comparatively small sum of money, the market potential is anything but trivial. According to a report by fDI Intelligence, the UAE was the second largest investor country in Africa in 2016, with a capital investment of $11bn, giving it a 12 percent market share.

That’s a lot more than the third biggest (Italy, at $4bn) though still way behind China’s $36.1bn. The report showed that UAE-led FDI rose 161 percent from 2015, when it pumped $4.2bn of capital expenditure into African projects.

The Global Business Forum on Africa aims to help businesses and government leaders identify opportunities and develop ties between Africa and Dubai

With six out of the world’s top ten fastest growing economies in close proximity to the Gulf, the UAE has become a partner for African businesses seeking an overseas satellite office, and a gateway for multinational companies looking to do business in Africa. Airlines, port operators, construction companies, and state-run investment funds are just some of the industries leading the charge, as Gulf investment attempts to branch out to south and west Africa.

Dubai Chamber of Commerce has already invested $27.2m in the last five years, as part of its expansion strategy in Africa, and the latest announcement will double this spending in the coming years. It has opened four offices in the region so far, and plans to open two more, with one in central Africa.

Its president and CEO Hamad Buamim says their efforts have given a major boost to UAE-Africa trade ties by facilitating cooperation between businesses and investors on both sides.

However, as Afshin Molavi, co-director of UAE based think-tank emerge85 says, more can be done to exploit this strategic position, and it goes way beyond the numbers.

Dubai Chamber CEO Hamad Buamim

“While the UAE is clearly a nexus state on the Southern Silk Road, it also has emerged as a global nexus state of trade. It has become a node of connectivity linking Europe and the Americas to Asia and Africa, and vice-versa. That’s why UAE-Africa ties matter so much to the continent. It could have a meaningful impact in connecting Africa to a wider world, while also playing a modest role in investing in the infrastructure needed for Africa’s growth.”

Courting consumers

That growth will be driven by many factors, but leading it all will be sheer demographics. Africa has the world’s most rapid urbanisation rate and, by 2034, is set to have a larger working-age population than both India and China. In the next eight years, consumer spending in Africa is set to rise by $1 trillion as emerging middle classes move into the cities, and their demand for consumer products and infrastructure grows.

At the conference, chief economist at the Africa’s largest financial services provider Standard Bank, Goolam Ballim, explains that “Africa houses approximately 16 percent of humanity, more than 1.2 billion people, and that will surpass 2 billion over the next 60 years.”

Afshin Molavi, co-director of Emerge85

He points to the variety of Dubai and Abu Dhabi entities that are active from a private equity point of view in aiding this growth, including Abraaj Group, which he says has been ongoing for several years. “Admittedly it is smaller than the Sino-Africa relationship, but the Middle east-Africa embrace – with an emphasis on Dubai – is rapidly increasing.”

Speaking to Arabian Business, Abraaj Group CEO Arif Naqvi says their turn to Africa has focussed on consumer-driven economies. “As people emerge into the middle classes and move into cities, they’re going to want more product, more infrastructure,” he says.

All about infrastructure

A poll conducted during the two-day Next Generation Africa forum revealed that 48 percent of delegates considered trade to be the most promising sector for investment, followed by financial services (24 percent), while 14 percent said logistics and tourism sectors had the most potential.

However, one of the biggest challenges to investing in the continent, the surveyed delegates said, was infrastructure. Gulf companies and governments invested more than $30bn in infrastructure development in Africa from 2004 to 2014, according to data from Dubai Chamber of Commerce and Industry, released at the event.

Standard Bank economist Goolam Ballim

Yet the continent requires much greater investment to develop its logistics and infrastructure, according to Sim Tshabalala, group CEO at South Africa’s Standard Bank.

“East Africa remains an important recipient of investments from the UAE, but there has been a shift to the south as well, trying to get diversity, and also to west African countries like Nigeria and Ghana,” Tshabalala says.

Dubai Chamber says it is hoping to further expand Gulf investment in west Africa, but logistics remain a challenge. “East Africa has a natural advantage because of its proximity to the UAE. But west Africa is growing and we’re trying to encourage it. Jebel Ali Free-zone (JAFZA) UAE is doing very well in Senegal in west Africa,” says Omar Alkhan, head of Dubai Chamber’s international offices. “DP World and JAFZA are there, and they have a free zone.”

Alkhan adds that the UAE, thanks to its own recent experience in rapid development, can aid this process thanks to it understanding the African culture more than western economies do. “We can be that intermediary between these two worlds,” he says.

Abraaj Group CEO Arif Naqvi

Capitalising on a strategic location

The UAE is playing an increasingly important role in bridging this infrastructure gap by using its proximity, along with its infrastructure and logistics services and experience, to support the trade of commodities such as oil, coffee, tea and gold, Alkhan tells Arabian Business on the sidelines of the conference.

Since 2012, Dubai’s Dubai Multi Commodities Centre’s (DMCC) Tea unit, which originally launched in 2005, has emerged as the world’s largest re-exporter of tea with a 60 percent share of the market and 750,000 kg annually passing through the UAE, valued at $48m per annum, DMCC data shows.

“DMCC has one of the largest tea trading, blending and packaging facilities in the world. So if you have your own tea and want to blend it, you take it to a taster, they’ll blend it, package it and put your face on it,” Alkhan says.

Sim Tshabalala, group CEO of Standard Bank

It’s a facility that, in the short term at least, saves African tea growers the capital and time of building their own facilities, he adds.

Dwarfing the trade in tea is the role that diamonds play in trade between the UAE and Africa. Dubai Diamond Exchange has the second-largest diamond centre in the world, with trade soaring from $3.03bn in 2008 to $25.5bn in 2015.

65 percent of those diamonds come from Africa and are then shipped to DMCC’s basement labs for washing and sorting, before being re-exported further east to factories in Surat, a city in western India, where over 90 percent of the world’s rough diamonds are cut and polished, according to statistics from the Kimberley Process office in Dubai.

In the last 15 years, rapid economic growth has seen Africa emerge from being a backwater to offering enormous economic opportunities. From Kenya in the east to Nigeria in the west, where incremental reforms have been implemented, to South Africa and Mozambique, Ballim from Standard Bank says that opportunities abound.

The World Bank said Kenya’s economic growth is projected to rebound to 5.8 percent in 2018

Dubai is one of the few places able to facilitate business and logistics for the Africa’s emerging middle class, especially for those in Kenya, Nigeria, and South Africa, he says. “Maybe not the whole continent, but various African countries are in rapid catch-up phase and Dubai can be that gateway into those opportunities, and I suspect the Dubai chamber has realised it,” he says.

The bumpy road to success

While growth has sped up about half of Africa’s economies, it has slowed the rest, raising fears among some observers that the continent is running out of steam. Mckinsey’s ‘Lions on the move II: Realising the potential of Africa’s economies’ report, released in September 2016, found that between 2010 and 2015, Africa’s overall GDP growth averaged just 3.3 percent, down from the 4.9 percent a year between 2000 and 2008.

This was due, in part, to the decline in oil prices and Arab Spring turmoil in Egypt, Libya, and Tunisia. However growth for the top half countries accelerated to 4.4 percent in 2010 to 2015. Governments and companies, especially in the Gulf, will need to work together to keep all of the region’s economies moving forward, experts warn, rather than cherry-picking the success stories.

With approximately 184 million people, Nigeria accounts for 47 percent of West Africa’s population

“A clear GCC strategy is critical for a new era of trade between the Arabian Peninsula and Africa,” says Joseph Dana, editor-in-chief of economics lab emerge85, in a recent research paper, ‘Bridging the Red Sea: How to Build an Africa-Gulf Partnership.’ “Trade infrastructure is being built but a unified vision remains elusive.”

The GCC as a whole still lacks a coherent vision, but if the member states work together they are uniquely positioned to develop a joint Africa strategy, Dana says. “Executed properly, it could be a model example of South-South co-operation.”

That may be forthcoming, as Gulf companies plan to build commercial hubs in the Red Sea area that seek to capitalise on the construction of new trade infrastructure in the Suez Canal Zone, being built by the Egyptian government.

Omar Alkhan, head at Dubai Chamber

A new deal between UAE port operator DP World and the Suez Canal Zone to develop an economic zone connected to the Al Sokhna Port in the Suez region was signed last week. Further down the Gulf of Suez, adjacent to the Red Sea and the Gulf of Aqaba, Saudi Arabia recently announced plans to build Neom, a $500bn business zone extending across its borders into Jordan and Egypt that will have an airport and port.

Saudi Crown Prince, Mohammed bin Salman told Bloomberg news agency the zone would not be in competition with other hubs like Dubai, but would provide the trade infrastructure to link the region’s logistical supply chain.

And with the International Monetary Fund projecting that Africa will be the world’s second-fastest-growing region in the period to 2020, that sort of cooperation seems like a very good idea. The opportunities have never been better.

Joseph Dana, editor-in-chief of Emerge85

SA, UAE strengthen bilateral relations

Tuesday, October 23, 2018

The second session of the Joint Commission between South Africa and the United Arab Emirates (UAE) saw the two countries pledge to strengthen bilateral relations in areas of infrastructure and the economy.

The Joint Commission, which was held in Pretoria on 21 and 22 October 2018, was co-chaired by International Relations and Cooperation Minister Lindiwe Sisulu and her UAE counterpart, Sheikh Abdullah bin Zayed al Nahyan.

The commission was preceded by a senior officials’ meeting which saw sub-committees engage on areas of economics, trade and investment cooperation, politics, security, transportation, food security, science and technology, social development, arts and culture.

Before the Joint Commission, Sheikh Abdullah Al Nahyan was received by Sisulu for a tête-a-tête.

“The discussions centred on the strategic importance of the relationship between the Republic of South Africa and the UAE and the successful outcome of the state visit by President Cyril Ramaphosa to the United Arab Emirates on 13 July 2018,” said Sisulu.

An agreement on cooperation in the area of social development between South Africa and the UAE was signed. The cooperation will focus on early childhood intervention, research and social studies, teenager development, services to person with disabilities, among other areas of mutual interest.

The Ministers discussed various issues of mutual interest to both sides including the economic potential and vast infrastructural development projects, following the UAE’s announcement of US$10 billion to South Africa during President Ramaphosa’s State Visit to the UAE, for the creation of a Joint Investment Fund.

“The $10 billion investment into South Africa can only be the beginning of much work,” said the UAE’s Abdullah bin Zayed al Nahyan.

The two Ministers also expressed satisfaction at the progress made during the visit of the South African Joint Technical Team to the UAE earlier in October 2018, with regard to the establishment of the Joint Investment Fund.

Economic, Trade and Investment Cooperation

On economic, trade and investment cooperation, both sides commended the increase in total bilateral trade between the UAE and South Africa over the last few years. They agreed to increase the volume of trade exchange and expand the scope of trade, investment and economic cooperation. 

The two countries agreed to expand UAE investment in targeted South African economic sectors such as industrial, mining, agro-processing, services, infrastructure development and innovation.

A planned roadshow promoting tourism by South African Tourism is set to take place in UAE in November 2018.

Further commitments were made to collaborate in the gas sector, including on Liquefied Natural Gas and infrastructure development.

Sisulu said a Memorandum of Understanding (MoU) on energy is under discussion and will be finalised once the parties agree on it. Both countries agreed to facilitate the finalisation of the MoU.

Both sides agreed to collaborate in the field of renewable energy through collaboration and knowledge-sharing of the UAE experience in developing renewable energy specifically in the field of solar parks; identifying potential collaboration opportunities in South Africa to be shared by the South African side and identifying potential collaboration opportunities for greenfield projects inclusive of floating solar power and waste to energy.

In addition, the two countries expressed a desire to cooperate in the field of small and medium enterprises.

This cooperation, will include among others, organising a trade mission of Emirati entrepreneurs with small and medium-sized enterprises to explore investment opportunities in targeted sectors of South Africa such as industry, transport, agriculture and tourism.

Defence and Security 

On defence and security, the parties discussed negotiations regarding the conclusion of a visa exemption agreement for diplomatic, special passport holders.

“We saw 80 000 South Africans who travelled to the UAE. We hope this will grow once the visa waiver between the two countries is finalised,” said the UAE’s Abdullah bin Zayed al Nahyan.

In closing discussions, it was agreed that the commission should be held on an annual basis. The third session will be hosted in the UAE at a date to be determined through diplomatic channels. – SAnews.gov.za

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The UAE and its ties to SA

Jul 22 2018 06:05 Justin Brown

Bilateral trade between the United Arab Emirates (UAE) and South Africa reached 11.75 billion dirham (R43 billion) last year, up 26% from 2016 figures, according to equity market news, data, analysis and investor tools website Mubasher.info

Major exports to the UAE include base metals and allied products, fruit and vegetables, steel for construction and general engineering, machinery, electronics, minerals, defence equipment, chemicals and plastic goods. Around 70% of South Africa’s imports from the UAE consist of crude oil. Other exports to the country include machinery, transportation equipment, consumer electronics, home appliances, computer accessories and textiles.

A recent significant development was the takeover of the UAE’s Al Noor Hospitals Group by Mediclinic in February 2016.

Other notable South African companies present in the UAE include Barloworld Logistics and Standard Bank.

Formal diplomatic relations between South Africa and the UAE were concluded during the visit by Sheikh Hamdan bin Zayed bin Sultan Al Nahyan in 1994 for the inauguration of former president Nelson Mandela.

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UAE, South Africa models for development, say Mohammad and Ramaphosa

Abu Dhabi Crown Prince, South African president discuss bilateral relations and cooperation


Published:  July 13, 2018 19:31WAM


Shaikh Mohammad Bin Zayed and Cyril Ramaphosa stand for the UAE national anthem during a reception at the Presidential Airport in Abu Dhabi on Friday.Image Credit: WAM

Abu Dhabi: His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, on Friday received Cyril Ramaphosa, President of South Africa, who arrived in the UAE on an official visit.

Talks between the two leaders focused on ways to strengthen relations and cooperation, and a host of regional and international issues of common concern.

Present during the discussions were Lieutenant-General Shaikh Saif Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Interior, and Shaikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs.

Shaikh Mohammad and Ramaphosa reviewed opportunities and avenues of cooperation in the fields of investment, economy, culture and others to meet the aspirations of both countries’ peoples, as well as achieve sustainable development, progress and prosperity.

Shaikh Mohammad said the UAE, under the leadership of President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, is keen on bolstering bilateral relations and cooperation with South Africa in all areas for the mutual interests of both nations.

Shaikh Mohammad described South Africa as an important friend of the UAE, and an effective and key African partner. The Abu Dhabi Crown Prince said the UAE and South Africa share many attributes, as both countries are symbols in embodying values of tolerance and openness for their respective continents.

Shaikh Mohammad pointed out that the UAE and South Africa are successful models for development, and are partners in achieving peace and stability in their regions.

Ramaphosa said that he is looking forward to boosting cooperation and joint work between his country and the UAE for the mutual interests of both nations and their peoples.

At the conclusion of the meeting, Shaikh Mohammad and Ramaphosa emphasised the importance of expanding avenues of joint cooperation, and utilising the diverse capabilities of both countries. They said that strengthening values of tolerance, understanding and mutual respect between peoples and countries around the world is essential for coexistence and bolstering the foundations of global peace, security and stability.

Also present during the meeting were Shaikh Abdullah Bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation; Sultan Bin Saeed Al Mansouri, Minister of Economy; Reem Ebrahim Al Hashemi, Minister of State for International Cooperation; and other shaikhs, ministers and senior officials.

Earlier, Shaikh Mohammad received Ramaphosa at the Presidential Flight airport. An official reception ceremony was held, where the national anthems of South Africa and the UAE were played, along with the firing of 21 artillery rounds to greet the country’s guest.

Shaikh Mohammad Bin Zayed and Cyril RamaphosaImage Credit: WAM

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