Southern Comfort
By Ian Munroe • Apr 30th, 2009Case in point. DP World has arguably led the growing wave of GCC investments below the Sahara. Since signing a joint venture agreement to operate Djibouti’s main port in 2000, the Dubai-based transport giant has expanded into Senegal, Egypt and Mozambique.
“We have said for some time that Africa is a key focus for the future,” says Anil Singh, senior vice president and managing director of DP World’s Africa operations. “We see exciting potential in the region,” he adds. “The states we have invested in understand that our commitment is long term.”
It’s a smart strategy if you consider the continent’s recent economic track record. Business has actually been brisk from Morocco to Mozambique for much of the past decade. Since 2003, Africa’s economy has grown by 5 to 6 percent a year continent-wide – its largest upswing in a generation. Decades-long conflicts came to a close in some states, ushering in new prosperity. Surging prices for commodities like energy and food helped national incomes to swell. And economic reforms drew in a little more foreign money, a growing portion of it from developing regions such as the Arabian peninsula.
Encouragingly, by the time the fin-ancial crisis struck last fall, the world’s poorest continent had been outperforming many wealthier regions for quite some time. As for 2009, the IMF and World Bank expect that Africa’s GDP will keep growing by 3 to 3.5 percent, while most OECD economies are projected to shrink.
The Gulf’s petroleum-rich states are keenly aware of such projections. “The interest is huge,” says Marie Bos, moderator of the GRC’s Gulf-Africa research program, which was established last year. “The Gulf has lost so much money and investment elsewhere, they feel Africa to be a sort of a new solution that can help both regions come out of this rough patch.”
GCC markets lost more than half their value in 2008. And the Gulf states’ overseas investments (60 percent of which are dollar-denominated) have depreciated by a whopping 30 percent since the crisis began, according to a February estimate from the Riyadh-based GCC secretariat.
Venturing into sub-Saharan Africa – as Abu Dhabi-based Mubadala and the Dubai Aluminum Company are doing through Guinea’s bauxite mines, for example – will presumably help diversify government holdings, shoring them up in case such calamities should recur.
While African states were largely spared from the initial shock of the fi-nancial crisis, many are now feeling the effects of the global recession. Indeed, the African Development Bank has set up a $1.5 billion emergency fund to deal with the recession’s growing footprint. In the Democratic Republic of Congo, for example, falling commodity prices have reportedly forced more than 60 Chinese-owned mines to close, while a further 100 mines are said to have been shuttered to the south in Zambia.
