Tuesday, 16 April 2013

Why Dubai wants to improve its business relationship with African markets

H.E. Hamad Buamim
H.E. Hamad Buamim
The Dubai Chamber of Commerce and Industry is hosting the first Africa Global Business Forum in the beginning of May in Dubai. The emirate – which has become a global trade and business hub for companies looking to access markets in the Middle East, Asia, Europe and Africa – has seen an increase in commercial interests in Africa over the last few years. Dubai’s transport and storage infrastructure, geographic position and business environment has led it to become an international trade centre and African trade is offering new growth prospects.

With the growth seen in African exports and imports, the forum’s focus will be to highlight Dubai’s role as a gateway to trade and investment opportunities throughout Africa. In an interview, H.E. Hamad Buamim director general of the Dubai Chamber of Commerce and Industry gave some insight into Dubai’s aspirations in Africa.

Why this interest in Africa?

Africa 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. While mining and oil are big businesses, infrastructure investment and the consumer market are major growth areas. The continent has a middle class estimated to be around 313 million, which is driving significant consumer growth. At the same time, 70% of its population is under 35, which is also helping to power further economic development. The International Monetary Fund (IMF) has predicted that no other continent will grow more strongly over the coming years. At the same time, governments across Africa are working to improve the business climate, which can only serve to strengthen its investment potential.

Despite all these positive figures, some investors still view business opportunities in Africa with caution, given the various challenges and obstacles that can exist. These vary widely from country to country, and it is difficult, if not naïve, to treat doing business in Africa in one uniform way. Yet, wide scale spending programmes are being rolled out across the board, and increased private investment is rapidly changing the situation.

What role can Dubai play in Africa?

Dubai’s position in the picture is a gateway into and out of the African continent. Historically, Dubai has always been a major transit point for goods and trade flows from Africa, 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 to operate from. The city’s extensive infrastructure and modern banking, financial and legal systems, offer good protection to investors and facilitate the ease of doing business. There are a number of successful companies doing just this – including Nestle, Louis Dreyfus, one of the world’s largest commodity traders, and MiDCOM Group, the largest Nokia distributor in Africa and the Middle East (MEA) region – who all based their Africa office in Dubai.

At the same time, African entrepreneurs seeking expansion into European and American markets can use Dubai as a base. Dubai is a gateway to Africa as the emirate’s close proximity and business-friendly climate is an ideal hub for the continent. Dubai offers international companies a safe haven to do business across the Middle East, African and south Asian regions and we will continue to facilitate and promote Dubai as an international business hub for decades to come. We envisage developing our existing trade relationship by encouraging more African companies to use Dubai as a base to trade with Europe, Asia, the Middle East and North America.

What UAE companies are already active in African markets?

A number of UAE companies have been major players in Africa for some time. DP World has had a presence since 2000 and now runs the port of Dakar in Senegal and port operations in Djibouti, Algeria and Mozambique. At the same time, telecommunications company, Etisalat, has stakes in Atlantique Telecom, which operates in about six countries in West Africa, as well as Tanzania‘s Zantel and Sudanese fixed line operator, Canar. These companies are proving that business opportunities exist across Africa for foreign investors and we hope that through the upcoming forum we encourage more.

What is the Dubai Chamber of Commerce and Industry doing in Africa?

Looking ahead, the Dubai Chamber will play its part to encourage more investment by opening a series of overseas offices in key locations across the continent. Our first, which is in the final stages of preparation, will open in Addis Ababa, Ethiopia, and will be followed by more over the next three to five years.

What areas of investment will the Africa Global Business Forum focus on?

The Dubai Chamber has identified a number of key sectors that can be targeted for investments:
Trade – Dubai’s position as an international re-export hub can be utilised for trade to and from Africa. Last year Dubai’s exports and re-exports to Africa valued AED395 billion (US$107.55 billion). Trade is a major growth area for Dubai investors. Dubai’s non-oil trade with Africa in 2002 valued AED10.6 billion ($2.89 billion), which has increased to AED84.8 billion ($23.09 billion) by 2011. This is a rise of 700% and the upwards trend is set to continue in line with Africa’s rising populations and affluent middle classes.

Finance – An under-resourced sector in Africa on the whole, some countries fare better than others. Opportunities exist for Dubai to export its expertise in Islamic finance.

Logistics – Long distances and storage difficulties mean that great opportunities exist for warehousing and distribution services across Africa. Logistics is a core economic driver in Dubai.
Agribusiness – Agriculture remains the biggest employer in Africa and agribusiness has the potential to drive the continent’s development. Industries based on agriculture and service companies will not only have to look to supply their home markets but also be substantial exporters. The UAE imports more than 80% of food, spending AED25.5 billion ($6.94 billion) on food imports in 2010. Dubai has more than 13,500 food establishments and imports food from more than 150 countries.

Tourism – Dubai is a hub for tourist flows from Asia (China, India) and Europe into Africa. Emirates airline flies to 22 different Africa destinations and is a key element in increasing connectivity. Dubai can be an air hub for international passengers into and out of Africa. At the same time, Dubai’s tourism sector is booming and can accommodate increases in the number of tourists coming from Africa.

What are some of the challenges of doing business in Africa?

Africa’s sheer size and scale can make it difficult to do business across its borders. The continent is home to 54 different sovereign states, each with uneven development, numerous small markets and varied practices and regulations. However, one approach is to segment Africa regionally, which its policy makers encourage and where Africa’s regional economic communities have either established free trade areas or are working towards it. At the same time, competition can be a challenge nowadays with the continent becoming more of a focus for FDI. Expectations of African stakeholders have increased with this and so investors need to look beyond fast returns and once-off projects to long-term growth and development.

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