- Africa and the Arabian Peninsula hold time long trade ties.
- Sheikh Mohammed bin Rashid Al Maktoum says Africa is one of the most promising business partners for Dubai
- Data from UAE’s Ministry of Foreign Trade shows that UAE’s total non-oil trade with Africa is worth US$19.1 billion
Africa is the world’s most promising market of the future and the United Arab Emirates has taken an interest, reviving some of the World’s oldest trade routes.
Historically, Africa and the Arabian Peninsula hold time long trade ties. This most recent 21st-century revival of trade between the two blocs has given new life to the great trans-Saharan trade of the 17th century.
In his own words, Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, ‘Africa is one of the most promising business partners for Dubai.’
Data from UAE’s Ministry of Foreign Trade shows that UAE’s total non-oil trade with Africa is worth US$19.1 billion – and this figure is expected to further rise in the coming years as the UAE authorities make concerted efforts to further diversify their trade and business interests in the African continent.
While, trade between the UAE and its former largest African partner, South Africa has dropped considerably (77 per cent) the UAE has nonetheless found new markets in the likes of Nigeria. Of the six countries mentioned, Nigeria has thus far proved to be the largest and fastest-growing trading partner.
With the launch of the African Continental Free Trade Area (AfCFTA), earlier this year, Africa effectively created the world’s largest free trade area that commands a $2.5 trillion economic bloc and a market of 1.3 billion people.
In this regard, Dubai’s strategic geographic location between Africa and Asia essentially makes it the most ideal trade partner, both as a destination as well as a transit port to and from China and India.
Africa’s non-oil trade with Dubai represented about 10.5% of the Emirate’s total non-oil foreign trade in 2018, indicating room for improved balance of trade for non-oil trade.
Before this most recent launch of the AfCFTA, the UAE was already trading with the Common Market for Eastern and Southern Africa (COMESA) economic bloc, formerly the largest economic bloc of African countries comprising 19 member states and having more than 389 million people and a total GDP of over $230 billion.
As such, the AfCFTA offers immense trade opportunities for the UAE complete with uniform customs, regulations and almost uniform transport infrastructure across the continent. The issue that remains is for Africa to leverage this trade opportunity to ensure that it gets value for its exchange. At the moment Africa is still importing more than it is exporting in monetary terms.
Balance Of Trade: Attempting To Equate Value of Exchange
The UAE embodies one of Africa’s most fair trading partners, in that it imports a considerable amount from Africa just as it exports to the continent. In fact the UAE is among the top ten importers of African goods representing non-oil trade worth US$19.1 billion in 2019.
Most recently, the UAE is venturing into developing several key sectors including tourism, transport, logistics, ports, IT and the mining and energy sectors as well. Notably, the UAE is also one of the leading sources of foreign direct investments into Africa.
In fact, Dubai World, a government organisation, has a special investment arm dubbed Dubai World Africa that is dedicated to Africa alone. The organisation focuses on acquisition, development and management of prime assets in Africa.
In the telecom sector, Etisalat, UAE’s telecom operator, operates in over 10 African countries including Sudan, Tanzania, Benin, Burkina Faso and Ivory Coast. Etisalat is expected to pump $5.5 billion into various African markets including $4.1 billion in East Africa and $1.4 billion in West Africa—this according to Mohammad Hassan Omran, Etisalat chairman.
“Expanding opportunities in Africa is absolutely the next big battleground…with the improving economies in Africa, you’ll have a lot more subscription and revenue…technology is now ready for Africa,” he prospected.
When it comes to agriculture, the UAE is not only importing African food products but also directly investing in farming on the continent. In this regard, Saudi Arabia is one of the biggest buyers of agricultural land, followed by the UAE, Qatar, Bahrain, Kuwait and Libya.
Notable here is Saudi’s acquisition of 500,000 hectares of land in Tanzania, and the UAE’s purchase of 400,000 hectares in Sudan. In 2008, Qatar acquired 40,000 hectares of land in Kenya in exchange for a $2.5 billion loan.
Old Frontier, New Prospects
There are a lot of opportunities for the UAE to invest in tourism and the hospitality sectors in Africa, especially East Africa. Countries like Tanzania is home to some of the world’s most coveted tourist attractions including the Serengeti, christened the 8th Wonder of the World.
Tanzania also has the Ngorongoro Crater, home to the oldest known human fossils and the world’s only tree-climbing lions. All of these are situated at the foot of Kilimanjaro, Africa’s highest mountain. On the coast, is the spice island of Zanzibar, a historically Arab island that is now a must-visit on every tourist’s wish list.
Africa is also moving to mechanize agriculture offering another avenue for heavy investment for technology-rich UAE. Investing in mechanizing Africa’s farms also goes to investing in the world’s food security and alleviating poverty, all of which are priority UN Sustainable Development Goals (SDGs).
Then you have the energy and mineral sectors; Africa, and in particular East Africa, has been the site for the world’s most recent offshore oil and gas discoveries. The potential is immense; however, here we must point out the equally lucrative and much more sustainable opportunity to invest in renewable energy. Africa offers vast expanses of huge wind and solar potential that can be harnessed to power the continent and beyond.
Bottlenecks to UAE-Africa Trade
According to President and CEO of Dubai Chamber, Hamad Buamim, poor infrastructure probably comes on top of the list of limitations to trade between Africa and most of the rest of the world, including the UAE.
This grave hindrance is also on the other hand, a huge business opportunity since the Emirates hold two of the most important inputs to alleviate Africa’s infrastructure limitations – funding and expertise.
The matter of unreliable energy which greatly increases the cost of doing business while slowing down production considerably must not be overlooked. The CEO also cites the matter of non-friendly business regulations and comparatively high tariffs.
Africa has long been a market of strategic importance to Dubai and the Emirate serves as a gateway for African companies that are successfully leveraging the kingdom to expand their global reach.
The potential for UAE-Africa investment cannot be over-emphasised. Investment forums like the upcoming Global Business Forum and the Dubai Expo 2020 serve as key platforms to realize this potential.
There is need for increased participation by African governments and business leaders at such events to iron out creases in the otherwise well-woven fabric of trade between the UAE and Africa.