Africa woos wealthy Arab investors

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Africa is warming up to wealthy Arab investors by offering lucrative returns in different sectors of the economy. Wooed by the promise of higher returns compared to assets in US and Europe, these investors are pouring large sums in Africa’s vast lands and unexplored natural resources.

The region has been able to attract investor interest as US and Europe are showing weak signs of economic recovery and remain troubled by heavy debts. On the other hand, governments in Africa are promoting reforms to liberalize the economy and promote greater participation by private sector in different industries.

Boasting a growing middle-class, improved governance and stable political environment, Africa presents huge opportunities in agricultural land and infrastructure projects. As Gulf investors have significant home experience in launching projects amid deserts, the continent is expected to show rapid development in the areas of construction and communication networks.

According to Ahmed Heikal, chairman of Citadel Capital, “I can see Gulf investors warming up to Africa. Any opportunity there grabs their attention. Africa is becoming more interesting because of the natural resources it has, its demographics and better governance.”

Cash-rich Gulf investors are flying high thanks to soaring oil prices. With plenty of cash to invest, they are hungry for higher long-term returns and exploring different opportunities in the world.  Even though US Treasury bonds remain a popular choice of investment, the trend is changing and developing countries of North Africa have come under the spotlight in recent times.

World bank in its report titled ‘Yes Africa Can – Success Stories from the Dynamic Continent‘ mentions Africa’s many success stories and how Africans can do more to unleash the full economic potential that is needed to transform one of the world’s fastest growing regions.

Over the past decade, annual trade between the Middle East and Africa has grown five times to USD 49 billion over the past decade. The investment has climbed steadily over the years due to linguistic, cultural and political ties shared by the two regions. However, Gulf businesses need to be aware of fierce competition from competitors in the African market. Although stiff competition has led to thinning of profit margins, North African countries appear to be strategically attractive for long-term growth.

Below is an infographic on African Economies from the Economist(2011) which forecast the likelihood of an impressive growth for the African continent:

African Economies GDP infographic
African Economies GDP infographic. Image courtesy-Economist

Global investment management firm T. Rowe Price in its latest report titled “Africa: A Story of Growth“ highlights key growth factors that suggest many African nations are now serious world players. The report points out that the Sub-Saharan Africa’s GDP is now equivalent to Australia – but with 50x as many people.

African Economies National GDP and Per Capita GDP Growth Infographic
African Economies National GDP and Per Capita GDP Growth Infographic. The IMF predicts that six of the 10 fastest growing economies from 2011-2015 will be located in Sub-Saharan Africa. They are Ethiopia, Mozambique, Tanzania, DRC, Ghana, Zambia, and Nigeria. Large untapped populations play a role as do geographic locations and political stability. Image courtesy: T Rowe Price


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