Investment prospects in Sub-Saharan Africa

UAE: Ahead of the 2nd Africa Global Business Forum (AGBF) this October, the Dubai Chamber of Commerce and Industry, in collaboration with the Economist Intelligence Unit (EIU), has developed a detailed study highlighting economic and investment potential in Sub-Saharan Africa and its potential to become the world's fastest growing region.

H.E. Hamad Buamim, President and CEO, Dubai Chamber , said that the Chamber always strives to provide companies and investors with access to studies and research that will help them take informed investment decisions in target markets, namely the African market where the future of business is very promising.

He also highlighted that the increase in economic reforms, rising fiscal spending and ties with fast growing economies in Asia are the main factors supporting the economy in Sub-Saharan Africa adding that the AGBF will shed a light on the economic and investment realities in Africa and will give business leaders and decision-makers from Africa, Dubai and the wider GCC region an ideal platform to discuss business partnerships and opportunities.

Also, challenges, opportunities and cooperation between African and Dubai based companies will be discussed further by leaders and businessmen attending AGBF in October, he said.

The President and CEO of Dubai Chamber further stressed that this study is one in a series of studies on Africa developed by the Chamber , and is aimed at introducing businesses in Dubai to investment opportunities available in the continent. 

The study further informs that Africa holds 60% of the world's uncultivated arable land, but remains a net importer of several food products as well as processed foods. Encouraging growth in domestic production and reducing reliance on imports is a key goal to governments and investors.

It states that investment opportunities are particularly significant in the telecoms sector. Although there are over half a billion mobile subscribers, most countries are still far from saturation and internet access is still almost non-existent in many countries.

The study emphasises that with the emergence of middle class, formal retail is starting to develop, offering "value" products aimed at lower income customers while infrastructure needs are enormous, with an estimated US$100bn a year required by the power sector alone. 

Angola
Focusing on Angola, the study states that high oil prices and increased production are forecast to keep the budget in surplus, with average real GDP expected to grow by 6.7% up to 2017 as Foreign Direct Investments (FDI) inflows have increased in the past few years (US$15bn) mainly in the energy sector. Since the civil war ended in 2002, banking has developed rapidly, with a total assets growth of 45% per year. However, the sector remains vulnerable owing to poor supervision and volatile liquidity.

Angola's exports are dominated by oil (98%) therefore goods imports will increase rapidly as rising incomes foster domestic demand. Government spending on healthcare, education and infrastructure is expected to increase.

Angola ranks 41st on the list of Dubai trade partners. Non-oil trade between Dubai and Angola accounted for AED7.3bn in 2013, whereas imports reached AED4.8bn and exports and re-exports reached AED2.5bn. 

South Africa
On South Africa, the study states that the country's business environment is among the most advanced in Sub-Saharan Africa and the private sector is well-established. Banking is well-developed and traditional mobile phone market has reached saturation point. The country remains a key destination for non-oil FDI which exceeded US$5bn.

Economic growth is forecast to average 3.5% per year up to 2016. Unemployment, income inequality, skills shortages and loose fiscal policy are key issues.

The study has ranked the market opportunities as moderate. Expansion of low-cost housing and welfare will boost demand for consumer durables.

Non-oil trade between Dubai and South Africa accounted for almost AED8.1bn in 2013. Imports reached around AED5.5bn and exports and re-exports around AED2.6bn. 

Traded commodities included prepared food stuff, vegetable products, chemicals, minerals, textiles, vehicles, machinery and electronic equipment. South Africa ranks 37th on the list of Dubai trade partners.

Nigeria
Nigeria is a strong destination for investments in telecoms and retail due to the large population (20% of the Sub-Saharan population). It is also a key market to multinationals.

FDI has exceeded US$6bn mainly in the energy sector. Owing to the investment in oil and gas, the economy will remain robust but will not be sufficient for a sizeable improvement in living standard.

Growth is expected to continue until 2017 owing to the investment in the oil and gas sector. Non-oil growth will be robust, led by telecoms, trade and infrastructure.

Non-oil trade between Dubai and Nigeria accounted for almost AED5.6bn in 2013. Imports accounted for around AED1bn and exports and re-exports around AED4.6bn. Nigeria ranks 47th on the list of Dubai trade partners.

Ghana
Ghana offers a relatively business-friendly environment, however poor infrastructure remains a major obstacle. Gold and cocoa are the dominant source of exports. Ghana is Africa's second-largest gold producer and the world's second largest cocoa producer.

For retailers, Ghana has the potential to become the gateway to West Africa's 250m consumers says tha study adding, GDP growth will average 7.5% annually until 2017, driven by the expansion of gold mines and burgeoning oil and gas sector.

Non-oil trade between Dubai and Ghana accounted for almost AED8.9bn in 2013. Imports accounted for around AED7.4bn and exports and re-exports around AED1.5bn. 

Ghana ranks 34th on the list of Dubai trade partners. The most traded commodities include agricultural products, foodstuff, precious stones and metals, wood and construction material.

According to the study, market opportunities are moderate. Mining communities and tourists in coastal towns and the much anticipated growth in population - expected to double in 20 years - will contribute to the development of the retail sector.

Tanzania
On Tanzania, the study states that tourism is a vital source of revenue and the economy remains dependent on agriculture and mining.

Real GDP growth is expected to average 7.1% up to 2017, assuming tourism, agriculture, trade and investment pick up while growth in construction will be robust, led by investments in the gas industry and infrastructure projects. 

FDI exceeds US$2bn and is expected to increase by 20% per year up to 2017. Mining is the largest source of FDI followed by telecoms and construction. Agriculture has also been targeted by the government as a source of future FDI.

In 2013, non-oil trade between Dubai and Tanzania accounted for AED6.8bn. Exports and re-exports reached AED2.7bn while imports accounted for AED4.1bn. Most traded commodities included vegetable products, animals, foodstuff, minerals, textiles, wood and chemicals.

Tanzania ranks 44th on the list of Dubai trade partners.

According to the study, market opportunities are moderate. The young and rapidly growing population is opening up opportunities in retail despite the low incomes.

Kenya
In its conclusion, the study states that Kenya's economy has developed into a market-led hub for East Africa's telecoms, retail and tourism sectors.

Growth will pick up to 5.1% a year on average as banking, telecoms and the middle class continue to develop. Prices of food and oil, and drought threat remain key risks.

FDIs are under US$0.5bn targeting mainly telecoms and financial services.

Non-oil trade between Dubai and Kenya in 2013 accounted for AED4.5bn. Imports were around AED1.2bn, while exports and re-exports accounted for AED3.3bn. Kenya ranks 50th on the list of Dubai trade partners.

Income per head will grow after 2014. Middle/upper-income class will expand boosting demand on durable and high value goods.

Retail, manufacturing, telecoms and banking provide the best opportunities, says the study.
NIKE