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Bulk of Gulf foreign direct investment goes to North Africa

Co-investment with private equity funds, purchase of private equity businesses and direct buyouts are the best means for Gulf investors to channel foreign direct investment (FDI) in sub-Saharan Africa.
This was revealed in a study launched by the Dubai Chamber of Commerce and Industry on the sidelines of the third African Global Business Forum, which concluded on Wednesday.
"Our new study and presence in Africa are a pledge of support for UAE and GCC investment. We will increase our efforts to direct our business community to the right markets," Hamad Buamim, president and CEO of Dubai Chamber, said at a Press conference.
Financial services, retail, tourism and logistics represent the most favoured sectors by Gulf investors, according to the study, which was produced in collaboration with the Economist Intelligence Unit (EIU).
Gulf firms provided $9.3 billion in FDI into sub-Saharan Africa in the decade of 2005 to 2014, in addition to a further $2.7 billion in the first half of 2015, more than in any previous full year.
This time, Gulf countries invested nearly 10 times as much in North Africa over the same period, demonstrating closer links with fellow Arab countries.
The study highlighted data from the African Development Bank which shows that average real GDP (gross domestic product) growth across the continent was 6.1 per cent in 2010 to 2014 and per capita income rose by nearly 60 per cent to $1,788, according to EIU estimates.
The research forecast a GDP deceleration to 4.1 per cent in 2015, mainly due to the commodity price shock, before a pick-up to 5.1 per cent in 2016. In addition, the International Monetary Fund forecasts average growth of 5.3 per cent from 2017 to 2020.
The study also underlined the importance of the average rate of population growth across Africa, which is 2.7 per cent, compared with a global average of 1.1 per cent (and 0.5 per cent in China).
The mid-case in the latest United Nations population forecasts see sub-Saharan Africa's population ballooning from 962 million in 2015 to 1.4 billion in 2030 and eventually to 3.9 billion at the end of the century, when it will host a third of humanity.
The report revealed a number of factors that make Gulf investment into these sectors particularly attractive: Demographic trends, growing consumer markets, economic stability and an improving business environment, as well as a resilience that has allowed it to withstand global recession and the current commodity price slump.
Buamim added that the Dubai Chamber aims, through the forum, to encourage Gulf investors to expand trust beyond the borders of North Africa, which currently makes up the bulk of Gulf investment, citing opportunities in sectors such as logistics, hospitality, retail and corporate banking.
- abdulbasit@khaleejtimes.com