Africa seeks GCC investments
African countries are sparing no opportunities to entice investments from Gulf Cooperation Council (GCC) countries. The drive is partly meant to counter adverse effects of the global financial crisis amid concerns that Western countries would devote more resources to solve local economic challenges rather than address international problems

By Dr Jasim Husain Ali

African countries are sparing no opportunities to entice investments from Gulf Cooperation Council (GCC) countries. The drive is partly meant to counter adverse effects of the global financial crisis amid concerns that Western countries would devote more resources to solve local economic challenges rather than address international problems.

African officials made their presence felt recently at two conferences held in Qatar and Bahrain. Several African leaders attended the UN-sponsored event entitled “Follow-up International Conference on Financing for Development to Review the Implementation of the Monetary Consensus” that ended on December 2, 2008 in the Qatari capital of Doha. The conference was meant to address the goal of development in poor countries through trade, aid and debt relief. These issues were agreed upon during the first such conference held in Mexico in 2002. However, the gathering has all but failed to achieve its aim partly due to the complexities surrounding the ensuing financial crisis.

A tale of two regional conferences
Except for French President Nicolas Sarkozy, western leaders stayed away from the Doha meeting. Strangely enough, even leaders of the International Monetary Fund and World Bank opted to shun the conference, ostensibly to avoid making specific commitments to poor African nations. Yet, several African head of states attended the conference hoping to secure financial commitments from wealthy countries in general and members of Gulf Cooperation Council (GCC) countries in particular.

In addition, officials and business leaders from Africa actively took part at the “Strengthening GCC-Africa Co-operation in the Gulf,” arranged by Crans Montana Forum Middle East in Manama. Several countries sent ministers of tourism to the gathering apparently to attract visitors from the GCC to explore Africa’s tourism potential. Still, others sent top officials from food, industry and energy sectors hoping to attract GCC investments in specific sectors. At the end, participants decided to set up a joint Africa-GCC council aimed at encouraging the setting up of joint projects and sharing expertise. In particular, the deal translates into African countries seeking investments from investors in numerous fields including infrastructure projects in the vast continent.

Potential of the telecom sector
Amongst all the sectors, African nations have managed to attract GCC investments in the telecommunications sector in particular, and for good reason. Telecommunication companies from the GCC have been keen to invest in Africa because of its unexplored potential. The continent boasts of 965mn people, in turn representing about 14 per cent of global population. Yet, African countries are not known for having outstanding penetrations rates in mobile, fixed line and the Internet. The International Telecommunications Union (ITU), a UN-agency, had projected that the number of mobile subscribers in Africa could have reached 278mn in 2008.

Etisalat Telecommunications Corporation (Etisalat) leads fellow GCC firms with regards to committing resources for Africa. In 2006, a consortium led by Etisalat won a third concession for a third mobile operator in Egypt through a deal valued at $2.89bn. Etisalat also has an 82.5 per cent share of Canar, which in 2004 secured a 15-year deal to offer mobile services in Sudan. In 2008, the UAE firm increased its stake in Atlantique Telecom from 70 to 82 per cent, as part of its efforts to boost its presence in Africa. Atlantique Telecom operates mobile services in seven countries: Ivory Coast, Benin, Burkina Faso, Gabon, Niger, Togo, and the Central African Republic. In addition, Etisalat has a 10-year management contract with the company that expires in 2015. The UAE government owns 60 per cent of Etisalat with the rest of shares being traded publically. Clearly, the UAE authorities must approve investment opportunities.

Eyeing SWFs
To be sure, the African attention focuses on making the continent a natural choice for sovereign wealth funds (SWFs) emerging from GCC states. The SWF of the six-nation GCC amounts to $1.5trn, of which $875bn belongs to the UAE alone. The GCC states managed to amass exceptional financial resources on the back of firm oil prices. Undoubtedly, oil prices dropped in the second half of 2008, on the back of global economic recession in the aftermath of sub-prime problem in the US.

Happily, Africa continues to entice larger investment amounts at large, suggesting growing confidence in the continent’s potential. Statistics suggest that African countries are becoming increasingly popular destinations for foreign direct investments (FDI). According to the World Investment Report 2008, issued by the World Conference on Trade and Development (UNCTAD), African countries attracted around $53bn worth of FDI in 2007 versus $46bn in 2006 and $30bn in 2005. Albeit, the amounts do not carry weight per se, representing less than three per cent of total FDI inflows last year. Nevertheless, the figures suggest a positive trend of FDI inflows, in turn focusing on developing farm, fisheries and tourism industries.

Overcoming chronic challenges
Nevertheless, African nations have the daunting task of overcoming chronic problems like corruption which are hindering its business prospects. Transparency International rates African states as the most corrupt countries in the world. Somalia ranks the worst nation on 2008 Corruption Perceptions Index (CPI). Congo Democratic Republic, Equatorial Guinea besides Guinea, Chad and Sudan are grouped amongst 10 worst performers in the survey. Yet, occupying No. 36 on CPI, Botswana secured the best result for Africa amongst 180 nations reviewed for the annual survey.

CPI rating depends on results of 13 surveys. Reviewed economies earn points based on perceptions expressed by business and academic professionals concerning ways of doing business in various countries. The respondents, which include local and expatriate residents, provide views about possible corrupt practices involving public officials about winning business preferences such as contracts. African authorities need to make the continent a safe place for business partly through solving local problems, but the prospects remain dim. Late last year, some 400 people lost their lives in Nigeria in clashes involving Muslims and Christians disputing results of a local election. Africa has the opportunity of enticing SWFs from the GCC, but the countries must do their homework. More than 190 countries worldwide seek foreign investments, in turn intended to address economic challenges such as economic growth and job creation and Africa will need to prove its credentials to gets its fair share of this deal.

The author is an eminent economist and Member of Parliament, Bahrain

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