South Africa a frontrunner to $2.7bn Gulf investment

Memory Mataranyika

Harare - South Africa is the second most preferred investment destination by Gulf companies, which have invested as much as $2.7bn into sub-Saharan Africa during the first half of the current year.

Companies from the Gulf region, whose investments into the region surged to $9.2bn between 2005 and 2014, are mostly interested in sectors such as financial services, retail, tourism and logistics, the Dubai Chamber of Commerce and Industry said in a report released on Wednesday.

South Africa is the second most preferred investment destination after Nigeria. The other countries making up the top four list are Kenya and Uganda.

The report says joint investments with private equity funds, purchase of private equity businesses, and direct buyouts were the “most significant modes of foreign direct investment entry for Gulf investors” interested in sub-Saharan markets.

Africa is attractive as an investment destination because of its projected population boom and massive room and scale for development and improvement in various sectors such as infrastructure, services, logistics and manufacturing.

“Nigeria, South Africa, Kenya and Uganda have attracted the largest number of Gulf investors - between 10 and 25 firms each. Although a few countries - such as South Africa, Senegal, Kenya and Cote d’Ivoire - have more prominent manufacturing sectors, they are still smaller than the global average,” according to the report.

FirstRand [JSE:FSR] has benefited from syndicated loans provided by an Emirates consortium of banks amounting to $85m. Stanbic Bank Rwanda, a unit of Standard Bank [JSE:SBK], has also benefited from this.

Qatar National Bank (QNB), the largest and most widely spread bank in the Gulf region, as well as the Investment Corporation of Dubai have also deepened investment and advances in Africa. The QNB has purchased a 23% stake in Ecobank of Togo while the ICD invested $300m in Nigeria’s Dangote Cement.

The African Development Bank says average real gross domestic product growth across Africa grew to 6.1% in 2010-14, while per capita income increased by nearly 60% to $1 788. However, recent research data shows that the regional economic growth forecast for the current year will decline to 4.1% mainly as a result of the commodity price shock, although a pick-up to 5.1% in 2016 has also been projected.

“Outside of South Africa, stocks and shares remain of limited interest to Gulf investors. (But) malls and hypermarkets are emerging in a handful of countries, (with) Gulf companies having a comparative advantage thanks to a track record in franchising and adapting brands to local tastes and cultures,” the report said.