March 10, 2008 / 12:48 AM / in 10 years

Arab entrepreneurs seek new riches south of Sahara

DAKAR (Reuters) - Centuries before European colonialists carved up Africa, Arab traders marveled at the profits to be reaped in the fabled lands south of the Sahara.

<p>A billboard shows potential luxury resorts contrasting sharply with a typically shabby and undeveloped stretch of waterfront in Senegal's capital Dakar, March 9, 2008. Senegal's President Wade (background billboard), who is hosting an Islamic summit this week, has capitalised on Islamic religious ties to attract investment, easing his country's reliance on Western donors. Saudi loans have rebuilt the roads of the capital Dakar, Iran plans an oil refinery and car plant, and Kuwaiti investors are building luxury hotels. REUTERS/ Finbarr O'Reilly</p>

“In the country of Ghana, gold grows in the sand as carrots do and is plucked at sunrise,” wrote Ibn al-Faqih, a 9th-century chronicler.

Arab investors, flush with revenue from record oil prices, once again see golden opportunities in Africa. From waterfront resorts in Cape Town to phone networks in Democratic Republic of Congo, they are pouring in billions of dollars.

“The opportunities which you see in Africa, you don’t see them anywhere else in the world,” said Sultan Ahmed bin Sulayem, head of the Dubai World conglomerate, after signing a $800 million deal this year for a free trade zone in Senegal.

Lebanese merchants have been a familiar sight along Africa’s western coast for more than a century, earning a living as middle-men trading everything from diamonds to cloth.

But the new wave of Arab investment is by big companies from the Middle East and North Africa, well equipped to challenge European rivals that thrived in sheltered post-colonial markets.

Decades of corruption and conflict in Africa have deterred many investors from anything but the easy profits of oil and minerals. But the continent is now enjoying its strongest growth since independence and more than a billion consumers are thirsting for goods and services.

Africa has become the arena for the world’s emerging economic powers to flex their muscles. The West has fretted as a phalanx of Chinese and Indian firms sealed multi-billion-dollar trade and investment deals. Now Arab firms are joining them.

Senegal, a former French colony on Africa’s western tip, hosts a summit of the 57-nation Organisation of the Islamic Conference this week aimed at boosting ties in the world’s Muslim community, which brings together Arab and African states.

“The Arab emirates, particularly Dubai, consider Africa as the future repository of world growth,” said Karim Wade, the summit organizer and son of Senegalese President Abdoulaye Wade.

“We need to develop economic and cultural exchange and ... the Dakar summit will be a major step,” he said.

GOODBYE EUROPE

Senegal’s President Wade has already capitalized on Islamic religious ties to attract investment, easing his country’s reliance on Western donors. Saudi loans have rebuilt the roads of the capital Dakar, Iran plans an oil refinery and car plant, and Kuwaiti investors are building luxury hotels.

In a symbolic shift, Dubai World wrestled a $455 million contract to expand Dakar port from France’s Bollore, a conglomerate which has flourished under the opaque network known as “Francafrique” linking Paris and its former colonies.

The French company criticized a “lack of transparency” in the tender but Wade said Bollore’s plans were too slow and bureaucratic compared with the dynamic Arabs.

“African governments are keen to have a different kind of relationship, something less patronizing,” said Patrick Smith, editor of Africa Confidential. “The Chinese and Indians have exploited this, and now perhaps the Arabs can too.”

Foreign direct investment in Africa doubled between 2004 and 2006 to a record $36 billion. Half of the $18 billion for mergers and acquisitions came from developing Asian countries, but Arab investors have been increasing their share, focusing mainly on services, from telecoms to banking and transport.

While Europe suffers an economic slowdown and the United States teeters on the edge of recession with the dollar at record lows, sub-Saharan Africa’s economy will power ahead by 6.5 percent this year, according to the IMF.

“With the U.S. and Europe slowing, it’s a chance for emerging countries to increase their presence in Africa,” said Smith. “2008 will be a very interesting year.”

Arab companies have already shown they are more risk- tolerant than their European counterparts. When British phone giant Vodafone slowed its expansion into Africa after acquiring South Africa’s Vodacom, Arabs stepped in.

Since 2005, Kuwait’s Zain has spent over $10 billion to quickly become Africa’s third-largest mobile phone company with operations in 15 countries, attracted by penetration rates of just 30 percent in Africa.

“Faced with competition from the Gulf, European operators like Vodafone and France Telecom have now realized they need to become more aggressive in Africa,” said Thecla Mbongue of analysts Informa Telecoms and Media.

ARAB-AFRICAN TENSIONS

Until Portuguese caravels sailed down Africa’s west coast in the 15th century, Arabs were virtually the only influence on sub-Saharan Africa for some 700 years as their camel trains crossed the desert to bring back gold and slaves.

The 7th-century Islamic jihad into North Africa formed a lasting bond between Africa and the Middle East, but cultural and racial tensions persist and have flared into conflict.

In Sudan’s Darfur region, more than 200,000 people have been killed in ethnic fighting between Black and Arab Africans, while Arab-dominated Mauritania has only just begun to repatriate thousands of black refugees expelled 18 years ago. Slavery still persists there and in parts of the arid Sahel belt.

In one visible sign of Arab influence, service stations across Africa once run by Mobil now have OiLibya signs outside them, after a Libyan company bought out the U.S. oil major’s African distribution network last year.

But the investment has strings attached. Libyan leader Muammar Gaddafi threatened in January to divert $5 billion in state investment to the Mediterranean if Africa turned its back on his plans for a continental government.

The head of the 53-nation African Union, Jean Ping, said recently that Arab investment to alleviate poverty throughout the continent was the best means of easing tensions between Arabs and black Africans in Sudan and the Horn of Africa.

But many are skeptical, citing differences between Africa’s moderate Islam and the more doctrinal Middle Eastern versions.

“Arab and Black African culture are in stark contrast, and a growing Arab presence could feed resentment in many parts of Africa,” said Alex Vines, head of the Africa department at London think-tank Chatham House.

In Senegal, some are apprehensive at rising Arab influence.

“Goodbye French colonization. Long live Arab colonization!,” wrote one contributor, named Bouki Sine, on seneweb.com, a news Web site. “As regards us Senegalese, I hope we have not also been sold: black slaves have always been popular in Arab countries.”

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