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OZY.com: Africa Has New Suitors — From the Middle East

Posted by: Berhane.Habtemariam59@web.de

Date: Tuesday, 03 September 2019

Africa Has New Suitors — From the Middle East
 

Abu Dhabi's Crown Prince Sheikh Mohamed bin Zayed Al Nahyan (C) receives Ethiopian Prime Minister Abiy Ahmed (L) and Eritrean President Isaias Afwerki (R) at the presidential palace in the UAE capital Abu Dhabi.

SourceKARIM SAHIB / AFP / GETTY

 

African nations are finding new investment partners, giving them greater negotiating room with the West.  

When Ethiopian Prime Minister Abiy Ahmed departed for his first official state visit outside Africa in May 2018, he did not travel to Washington, London or Beijing but to Riyadh, the Saudi capital, before heading to Abu Dhabi in the United Arab Emirates. That was followed by a trip to the Qatari capital, Doha, and return visits to Riyadh and Abu Dhabi, all within his first year in office.

That Abiy eschewed the traditional global centers of capital by heading instead to the Middle East was symbolic of the new freedom enjoyed by African governments to choose sources of foreign direct investment, as competition for opportunities in Africa’s fast-growing economies intensifies. Ethiopia has been largely dependent on government-backed investment from China for much of the past decade, but Abiy, since coming to power in 2018, has promised to liberalize the country’s economy and open various sectors to new sources of foreign investment.

This diversification in investor origin is happening right across the continent [Africa].

Ashley Elliot, Sofala Partners

In downtown Addis Ababa, the capital, an Abu Dhabi–based real estate group is developing 4,000 apartment units, three hotels and a mall on a 36-hectare plot surrounding the city’s former train station. By the end of 2018 some 200 Turkish companies were operating in the country, according to Turkey’s foreign ministry. Later this year when Ethiopia invites investors into its telecommunications sector for the first time, companies from the U.K., France, South Africa and the UAE are all expected to bid for either spectrum or a stake in state-owned Ethio Telecom.

“We’re seeing investment interest in Ethiopia from almost every corner of the world,” says Ashley Elliot, managing partner at advisory business Sofala Partners. “But it is not just Ethiopia — this diversification in investor origin is happening right across the continent.”

Attracted by Africa’s vast natural resources, as well as its fast-growing populations, underdeveloped markets and open attitude to innovation, countries from Russia to India to Qatar are vying for opportunities and influence. On the continent, this heightened level of investor interest has given African states greater agency and more power to shape the composition of the foreign direct investment they receive, says Abebe Abebayehu, head of the Ethiopian Investment Commission.

“In the past, any walk-in investor would get his investment permit from the commission, but now we actually do sectoral studies and we identify countries that have successful performance in that particular sector,” he says. “We will try to draw lessons and even adopt certain policy instruments that may have worked in that country. We would also zoom in to the specific companies that may have driven the growth of that specific sector in those countries, and then we will try to approach those companies.”

Such heightened competition has provoked a new investment arms race as old donors and new partners seek to strengthen their commercial relationships with African countries. This year the U.S. is set to bolster its influence in the region through the creation in October of the U.S. International Development Finance Corporation, which will boast a $60 billion budget and mandate to invest in developing countries. CDC Group, the U.K.’s overseas investment arm, has committed to investing $4.2 billion in African businesses between 2018 and 2021, while Russia is expecting to host dozens of heads of state at its first Russia-Africa summit in October in the Black Sea resort of Sochi.

The competition is not only drawing in new investors but pushing existing players into new markets, says Andrew Jones, head of the Africa group at U.K. law firm Linklaters. “You’re also seeing existing Africa investors going to places in Africa that they hadn’t thought of going before. South Africans in Francophone Africa, the French in English-speaking Africa,” he says.

In 2017, Emmanuel Macron became the first French president to visit English-speaking Ghana in 60 years. This year he organized state visits to Ethiopia, Kenya and Djibouti, trailed by a delegation of French executives. Elliot says the push-pull factors driving each strand of foreign direct investment are different. “It’s a mix of motives. The aggressive push into African markets we’ve seen from the Gulf and especially Morocco is about statecraft: strategic investment bound up with political promises,” he says. “We’ve seen an uptick in investment from places like Turkey and South Africa — my hunch here is that higher investment risk at home is driving firms to diversify into sub-Saharan markets,” he continues. “Next [I expect] is the surge in African deals from the big Japanese trading houses, perhaps looking to catch up in the race for African opportunities.”

The result will be positive for Africa’s development, says Ethiopia’s Abebe, if countries are strategic and able to manage the new competition effectively. “We are not exclusively catering to China, or the EU or America … we try to have a pragmatic approach in our investment selection drive,” he says. “There is so much potential.”

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