Arabian Gulf countries may be key to unlocking Africa’s riches

Africa is the investment destination of the future. It always has been.

Economists and investors have long seen the continent as the unmined vein of the global economy. Geographical location, natural resources, demographics and sheer unexploited opportunity make Africa the “next big thing”.

In a world still obsessed with economic growth measured by GDP, African potential comes out on top. The fact that seven out of 10 of the fastest growing economies in the world are in Africa may owe a little to the spin doctor’s art rather than the statistician’s, but it is true that the continent boasts faster growing economies than the US, Europe or Asia.

How to exploit that potential has always been the issue, especially for western investors. Side by side with the dazzling prospects, the negatives are stark. Africa seems to have more than its fair share of virtually all the things that deter foreign direct investment: political instability, corruption, inadequate infrastructure, medical emergencies and social problems.

Perhaps the world was approaching the continent from the wrong direction. When global investment patterns were determined by Americans and Europeans, it was they who decided how and where to invest in Africa, with little success apart from the booming profits of commodities companies.

That has begun to change. Even before the financial crisis, China was beginning to invest big time in Africa (with mixed success, it should be noted). Since 2009 and the “tilt to the east”, the Middle East has begun to consider itself as the hub of the giant global investment wheel, and the UAE in particular has woken up to the potential of Africa.

In the next few weeks, Dubai will host two events that confirm this new-found interest in the continent, and offer a different approach to it.

Next week, the West Africa Investment Forum comes to Dubai, with eight heads of state and the leaders of financial organisations from the region. In early October, the Dubai Chamber of Commerce hosts the Africa Global Business Forum, a pan-continental get-together of business leaders and policymakers.

Potential investors, of course, are welcome, and expected, at both events. Senior representatives of the region’s big sovereign wealth funds, private equity and other big moneymen are on the invitation list. The West Africa meeting will focus on the attractions of a part of the continent sometimes left out of the investment equation: the largely francophone nations that comprise the West African Economic and Monetary Union (UEOMA, in its French acronym).

The eight, of which Senegal is the biggest, share a common currency (no mean achievement), the CFA franc, and a customs union with other West African states. As economic unions go, it has been relatively enduring, despite the political and social troubles that have plagued the region.

They real need is for infrastructure investment of all kinds, as has been cruelly demonstrated in the recent outbreak of Ebola disease. The quarantine put in place by some countries in West Africa, and enforced on those same countries by the rest of the world, will of course have an economic cost.

It may seem heartless in view of the human tragedy taking place there, but already the economists are chipping away at the growth forecasts for the region, said before the outbreak to have been better than the African average. Expectations of 7 per cent GDP growth and above are now regarded as unrealistic.

The economic and investment implications of the Ebola disease are bound to be a prominent topic at the forum. But perhaps the lesson is that if West Africa had the essential infrastructure of roads, logistics and medical facilities in place before the outbreak took place, it would have been a lot easier to take measures against it.

The Arabian Gulf countries, and the UAE in particular, have shown their expertise in infrastructure investment and management. The region has huge pools of liquidity looking for a good return, but finding that difficult to achieve in the more competitive markets of the West or Asia.

According to a survey by international accountants EY, global investors now see Africa as the second most attractive environment in the world. Arabian Gulf investors could just be about to fill the infrastructure gap in Africa, and make a healthy return doing so.

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