Mid-East leading cross border businesses in Africa boom

Middle East business are showing the world that Africa is ripe for investment, with Abu Dhabi companies leading the charge in setting up or expanding there, this year.

ABU DHABI - 9. Oktober 2014.

The latest United Arab Emirates company to increase existing business there is Etihad Airways, which has just said it will expand its African presence with a new daily service to Tanzania.

Meanwhile, Trojan General Contracting owned by Sheikh Tahnoon bin Zayed Al Nahyan has secured its place in a $16bn scheme to extend West Africa's road and railway network.

Kuwait’s Mobile Telecommunications Company last year bought out a Dutch mobile operator that was about to bring a new pan-African brand to market, for $3.4bn.

This fast-growing Arabic telecoms company now has a presence in 15 African countries, and has poured $750m into Tanzania alone it has similar expansion plans for its Nigerian subsidiary, and is looking to increase its network across Senegal, Ghana, Angola and Ethiopia. 

This follows Dubai-listed property group International Financial Advisors purchase of a 50 per cent stake in the Zimbali Coastal Resort on KwaZulu-Natal’s north coast where it plans to invest $100m over the next 10 years. Just months before, the same firm acquired the nearby Zanzibar Beach Hotel for $50m, as part of an aggressive drive to increase its African holdings.

The attraction for foreign companies in Africa is in part the continent's strong GDP growth, and burgeoning middle class, both of which have been increasing steadily over the past decade.

These two factors have combined to broaden the investor base on the continent that's seen total emerging market fundraising in sub-Saharan Africa alone double to six per cent in 2010, from three per cent in 2007.

Private equity as an asset class is consequently offering deals at low valuations in Africa, and providing access to foreign businesses to take advantage of less well-represented sectors - including consumer goods and services - on the continent's stock exchanges.

Foreign investors are making hay, with good and consistent returns following as a result.

This year, the African Private Equity and Venture Capital Association and Ernst & Young reported that private equity in Africa has consistently outperformed other listed equities indexes since 2007.

Private equity businesses in Africa are typically looking for high-growth businesses with proven management, who are riding the wave in increased consumer spending and increasing trade in the region.

Due diligence continues to play one of the most important parts of the investment process when foreign companies - whether European businesses, Asian businesses or Middle Eastern businesses looking to operate in Africa, pick targets to invest in. They are increasingly insisting on greater standards to mitigate risk and maximise returns, with more stringent requirements now relating to business track records, institutionalised back offices and company financial reporting than even just a year ago.

African leaders have called for a continental free trade area by 2017 to boost trade within the continent. The World Bank has pointed out that it continues to lose out on billions of dollars in trade annually, because of internal trade barriers between countries, making it easier for Africa to trade with the rest of the world than with itself.

As such, so long as precautions such as business checks and investigations are respected as part of the due diligence process first, the fundamentals of Africa present continued growth opportunities for cross-border businesses as well as private equity investors for years to come.


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