UAE-Africa: Dubai is back
Relations between the United Arab Emirates (UAE) and African countries have gone from boom to bust and back again, with Dubai-based companies now scouting for multibillion-dollar projects in Northern and sub-Saharan Africa.
The Dubai economy crashed during the financial crisis in the US in 2008 and 2009, leaving contractors with vast unfinished real estate projects at home and across North Africa.
Dubai SMEs are very keen to expand their operations into the African market
The optimism and bravado that Emirati companies brought to African markets is back.
One sign of such a resurgence is Dubai-based Arabtec’s plans to build $40bn in housing developments in Egypt alone, a project that has been on the table since late 2014.
Emirati minister of state Reem Ebrahim Al Hashimi tells The Africa Report that UAE-Africa ties have much more room to grow: “If our footprint in the global economy is to truly reflect our markets and their potential, we must build on each other’s comparative advantages and very much on our individual strengths.”
Again, UAE companies and the country’s authorities are talking up huge projects that may or may not be developed depending on the future of local and international financial markets.
“Most recently during the September 2014 Union Economique et Monétaire Ouest-Africaine Investment Forum held in Dubai, UAE businesses committed around $19bn for 17 infrastructure projects in West African countries through PPPs [public-private partnerships],”Al Hashimi says.
UAE companies have been big proponents of the development of PPPs that seek to encourage innovation and bring out the best of the public and private sectors.
The president and chief executive of the Dubai Chamber of Commerce and Industry (Dubai Chamber), Hamad Buamim, is bullish about the opportunities that Emirati companies see in Africa.
Speaking toThe Africa Report, Buamim says: “Dubai SMEs [small and medium-sized enterprises] are very keen to expand their operations into the African market. They are definitely looking forward to launching their brands into the various lucrative markets of the continent.”
The Dubai Chamber in Ghana, which launched its operations in January, announced that its five-year objective is to double trade between the two countries to reach $5bn.
This should lead to a push for Emirati companies to trade with Ghana, especially since trade between the two countries has typically been dominated by Ghana’s cocoa and gold exports.
There are an increasing number of initiatives supported by the public and private sectors that bear testament to the strengthening relationship, such as the annual Africa Global Business Forum (AGBF) held in Dubai.
The opening of the Dubai Chamber in Accra was preceded by the opening of an office in Ethiopia in 2013. Plans are also afoot for the chamber to extend its reach to Mozambique, says Buamim.
These strategic moves are in concert with a flurry of activity in the continent’s consumer markets.
In December 2014, the Abraaj Group, a private-equity firm, made its first investment into Algeria when it acquired a stake in the country’s largest logistics and transportation company,La Flèche Bleue Algérienne.
Also in 2014, Abraaj bought a majority stake in Liberty Star Consumer Holdings (Libstar), a manufacturer and distributer of house-hold, food and personal-care goods in South Africa.
In East Africa, the Dubai Islamic Bank (DIB) has one more hurdle to cross before it opens a sharia-compliant branch in Kenya.
The Emirati bank has been given approval in principle by the Kenyan authorities, but it must still obtain its licence before it becomes operational.
The arrival of Dubai-based companies in Africa has not been without its problems. For instance, Dubai Ports World, one of the largest global port companies, has come under investigation by the government of Djibouti for corruption.
The dispute between the company and government is now under arbitration, and Dubai Ports insists that it will regain management control of Djibouti’s Doraleh port because it has done nothing wrong.
At the last AGBF in October 2014, Tim Clark, the president of Emirates airline, said that the airline views Africa “as a growth story” and as such, the company “will continue to grow [in Africa]”.
The company already serves 20 African cities and operates twice-daily flights from Dubai to Lagos.
This portfolio of destinations is likely to increase with the addition of 10 new routes within as many years, says Clark, with destinations in Mozambique and Tanzania on the list.
Ethiopian fights back
African carriers do not welcome the competition in the air, however. Emirates is aggressively seeking African passengers through bold marketing campaigns and the allure of easy border entry.
The chief executive of Ethiopian Airlines, Tewolde Gebremariam, has underscored that more ought to be done to ensure that there is greater support for local airlines because nine African carriers have just 20% of the African market.
Ties are being strengthened on both sides, and African entrepreneurs are also setting up in Dubai to benefit from its status as a global trade and transportation hub.
According to Buamim, the number of African companies that are members of the Dubai Chamber went up from 2,914 in 2008 to 7,906 by mid-2014.
Up-and-coming Ghanaian fashion designer Nana Agyeman describes Dubai as a compelling place to do business.
“Designing is often about a sixth sense – what’s new? What’s next? [And] these questions were answered by this new environment: a change of pace and landscape – a melting pot of elegance, modernity and traditionalism,” he says.
Frank Welffens, the chief operating officer of Asia Africa Business Consultant Limited, is also optimistic about the city’s opportunities.
“Dubai offers what other parts of the world and especially Africa does not yet offer: infrastructure and ease of doing business,” he explains. ●