By ALLAN ODHIAMBO, Business Daily
In Summary
- The Gulf is suffering the same fate as other resource-intensive economies like Angola, Africa second-largest oil producer, Botswana which mines diamond, gold and copper, and Nigeria whose oil accounts for 95 per cent of exports.
- “We follow the demands of customers and go where they want us to be. Africa has immense potential for trade and we respect that,” said Sultan Ahmed Bin Sulayem, chairman of DP World, that operates a portfolio of 65 marine terminals globally including in Djibouti, Mozambique, Senegal and Algeria.
- The $500 million sale, jointly arranged by BNP Paribas, Kuwait Finance House Investment Limited and Standard Bank of South Africa, was four times oversubscribed, with investors from the Gulf Corporation Council getting more than half of the subscription allocation.
When leaders and policymakers converge in Dubai next month
for the third Africa Global Summit, top on the agenda will be how to
sustain growth momentum in the wake of dwindling commodity prices.
For about five years, Africa has registered booming growth in
key sectors propped by, among other things, high commodity prices,
better governance and deep investments in technology.
The bullish run is, however, being threatened as global prices
of oil, iron and copper plummet — creating a dilemma for decision makers
in Africa as the high economic growth slows down.
Africa is home to a third of the world’s mineral reserves and a
tenth of the oil and the falling prices have dented economic outlook.
The International Monetary Fund (IMF) in its latest outlook
predicts average sub-Saharan economic growth of 4.4 per cent for 2015,
down from the 5.8 per cent forecast a year ago in the wake of the
commodity price drops.
Oil prices have declined sharply, reflecting resilient supply,
the prospects of higher future output following the nuclear deal with
the Islamic Republic of Iran, and weaker global demand.
Metal prices have also fallen on concerns about global demand,
especially the slowdown in commodity intensive investment and
manufacturing activity in China, but also owing to increases in supply
following the past mining investment boom.
“Commodity exporters in particular have seen sharp depreciations
of their currencies, but a general trend of reduced financial inflows
to emerging markets has resulted in more generalised depreciation
against the US dollar, euro, and yen” Maurice Obstfeld, an economic
counsellor with the IMF says.
The Gulf is suffering the same fate as other resource-intensive
economies like Angola, Africa second-largest oil producer, Botswana
which mines diamond, gold and copper, and Nigeria whose oil accounts for
95 per cent of exports.
This dilemma over fluctuating commodity prices provides a common
ground for Africa and member countries of the Gulf Cooperation Council
(GCC) ahead of the two-day summit in Dubai.
Both sides are keen on finding long-term solutions to cutting
dependence on commodities such as oil as the main drivers of their
economies.
“Commodities are under a lot of pressure due to fluctuating
prices and Africa has opportunities to move away from commodities. We
need a new order of trade and investment,” Hamad Buamim, president and
chief executive of the Dubai Chamber of Commerce and Industry (DCCI)
says.
Investors in the Gulf are re-routing their money into new
investment sectors in Africa including tourism, real estate, trade,
hospitality, shipping and logistics.
175,000 companies
“We have to move away from just commodities and find new fronts.
The potential to trade and invest in other sectors other than
commodities is huge and will need to walk that journey with Africa,”
Omar Khan, director of international offices at the giant DCCI with a
membership of 175,000 companies says.
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The foray by Dubai firms into non-commodity sectors in
Africa has already commenced in earnest and the momentum is expected to
build up in the new year when the chamber sets up new liaison offices in
destinations such as Kenya. The chamber already has offices in Ghana
and Ethiopia.
Financial institutions in the Middle East have become active in
arranging for financing in Africa, amid growing interest for Islamic
products.
“Africa is the destination for future investments, and the
Islamic economy sector in the continent is still in the growth phase,
therefore, we invite UAE companies to work in this area to make Dubai
the capital of Islamic economy,” Mr Buamim says.
Islamic products
In countries such as Kenya, Ethiopia and South Africa the
Islamic segment of the population is increasingly demanding Islamic
financial products.
Earlier this month, CfC Stanbic Bank signed a $155 million dual
tranche loan with a group of Middle East and international banks, to
support its corporate functions, including trade finance.
Dubai’s Emirates NBD Capital Limited was the sole coordinator
and bookrunner of the financing with a three-year term. The transaction
was launched for $100 million but was oversubscribed by $55 million.
“Since the beginning of the year we have arranged a number of
syndicated loan transactions for African financial institutions. We are
pleased to have again partnered with Standard Bank Group in yet another
landmark transaction for its subsidiary, CFC Stanbic Bank, Kenya,”
Mohammad Kamran Wajid, chief executive Emirates Financial Services and
Emirates NBD Capital said in a statement.
Abu Dhabi Commercial Bank, Al Ahli Bank of Kuwait, The
Commercial Bank, Mizuho Bank and Standard Chartered Bank joined the
transaction as mandated lead arrangers alongside Emirates NBD Bank,
while AfrAsia Bank Limited, Al Khaliji France and Commerzbank
Aktiengesellschaft, Filiale Luxembourg participated as lead arrangers.
Doha Bank participated as an arranger.
The financing was the second for CfC Stanbic in the
international syndicated loan market. In 2014, CfC Stanbic stepped up
the battle for control of corporate lending market with a $160 million
syndicated loan from the international market for onward lending to
companies in the region.
The two-year facility was targeting $125 million but with an
oversubscription of $35 million CfC Stanbic was able to extend it to
$160 million.
In September 2014, South Africa became the third non-Muslim
country, after Hong Kong and the UK to issue Islamic-compliant debt
setting a significant precedent in Africa.
The $500 million sale, jointly arranged by BNP Paribas, Kuwait
Finance House Investment Limited and Standard Bank of South Africa, was
four times oversubscribed, with investors from the Gulf Corporation
Council getting more than half of the subscription allocation.
The bond, which matures in June 2020, is part of South Africa’s objective to diversify its funding and investor base.
The national Treasury in South Africa is now working on issuing
the country’s first domestic rand-denominated sukuk with the aim of
diversifying funding and expanding Islamic finance beyond the banking
sector.
Total Islamic banking assets currently account for 3.5 per cent of total banking assets in South Africa.
Preliminary highlights of a study by Economist Intelligence Unit
(EIU) commissioned by the chamber (DCCI) showed that large investment
opportunities in Africa remained untapped in areas such Islamic finance,
halal food and tourism.
“Islamic financial products have gained popularity in Africa
because of the ethical issues attached to them. They are considered
highly ethical,” Adam Green, a senior editor with Economist Group says.
The study pointed that sub-Saharan Africa regional spend on
halal food was about $114 billion in 2013 based on Thomson Reuters data.
Emphasis has been mainly on halal meats and meat products, but
over the past few years, the trend has been shifting to the introduction
of halal franchises, prepared meals, canned, frozen and instant foods.
Tanzania, Zanzibar and South Africa are leading the trend
towards the adoption of halal tourism market requirements in the African
continent.
Global Muslim spending on travel is expected to reach $238
billion by 2019. Africa has a small share of the halal market,
representing five per cent of the global market travel.
South Africa hopes to increase the value of halal exports by $31
billion by 2020 and reinforce its position as gateway to the
continent’s halal food and beverage market.
Despite of its small Muslim population, South Africa has emerged
as one of the five largest producers of halal products worldwide
largely due to its access to the rest of the continent and the presence
of highly advanced halal certification programmes (60 per cent of all
products in its retailers are certified halal) worth about $71.7
million, according to Malaysia External Trade Development Corporation.
“Halal travel in Africa offers significant growth potential for
the tourism industry. Muslim tourists globally represent a major niche
market — a market that has a young demographic, is growing in affluence,
and is increasingly asserting its unique needs on the travel, tourism
and hospitality market” Mr Buamim says.
The hospitality industry in Africa has caught the interest of
large global firm from Dubai such as Jumeirah Group that is eyeing deals
in prime markets such as Kenya, South Africa, Mauritius and Nigeria for
partnerships.
Mombasa port
The Dubai firm, the global chain that owns the iconic Burj Al
Arab hotel, in 2014 signed a management agreement to operate a luxury
resort in Mauritius. The hotel is currently under development and
expected to open in 2018.
“A number of deals are under negotiation in a number of African
countries,” said Mr Piers Schreiber, the group’s vice president for
corporate communication and public affairs.
Muslim tourists mainly determine their visits on availability of
halal food, family environments and sites that accommodate their
religious practices and gender related amenities such as private
swimming pools. Apart from finance and tourism, Dubai firms have also
become active in trade and logistics sectors in Africa.
“We follow the demands of customers and go where they want us to
be. Africa has immense potential for trade and we respect that,” said
Sultan Ahmed Bin Sulayem, chairman of DP World, that operates a
portfolio of 65 marine terminals globally including in Djibouti,
Mozambique, Senegal and Algeria.
“We have made a bid to manage a concession at the port of
Mombasa and we hope things work for us. We are also interested in the
Lamu port project and when the right time we will make a bid for it
too,” he said.
Emirates Airlines said Africa offers great business opportunity
and plans to launch new services to Bamako, Senegal on October 25.
“Additional capacity is usually absorbed fast in Africa and we
are constantly watching for opportunities to move in,” Hubert Frach,
Emirates Group divisional senior vice president for commercial
operations in west Americas, Africa, Europe and Russia says.
Emirates currently operates passenger and cargo flights to 27 Africa destinations
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