BY GILLIAN SARAH DUNCAN, SPECIAL TO REACH BY GULF NEWS
It is a trading relationship that stretches back centuries, but has strengthened in modern times. In 2010, global consultancy McKinsey described the potential of African economies as “lions on the move”. Today, despite slower global growth and the collapse of commodity prices, Africa’s economic lions are still moving forward.
And the UAE, already the main trading partner of Africa in the GCC, could be set to benefit from a surge in the growth of gross domestic product (GDP) across the African continent in the coming years. Africa’s GDP will expand 2.6 per cent this year, but is expected to increase, and some experts think it could overtake China in future. China is expected to grow 6.9 per cent in 2017.
“Sub-Saharan Africa is growing faster than the global average. It is growing slower than China. It is growing faster than the US and Europe, so there is a lot of potential for it at this time,” says Jan-Willem Sudmann, Head of International Banking Group at Mashreq.
“I think Africa has potential over the next 10 years to have stronger GDP growth than China.”
The growth will mainly be fuelled by a young, emerging middle class with increasing spending power. “There is a motivated generation, hungry for success and who aspire to improve their quality of life and their environment, which offers a lot of opportunities for companies,” says Sudmann (pictured right).
And there are several reasons why the UAE is poised to benefit in particular, he adds.
The UAE not only has excellent transport links, with more flights to and from Africa than any other country, but is also home to large ports that are well positioned to serve the continent. “Dubai has strategically positioned itself very nicely for this development,” says Sudmann.
The continent’s main trading partners are Europe, India and China – however, the UAE has steadily been increasing its share. Africa has become a major focus for Dubai in the past three years, says Hamad Buamim, President and CEO of Dubai Chamber of Commerce and Industry.
The UAE, already a key trading partner of Africa, is set to benefit from a surge in GDP across the continent
“When you look at the trade, today it stands at around $35 billion. It is quite a sizeable number,” says Buamim, “But what is also more important to us, in the past 10 years it has grown almost three times. It was 3 per cent of Dubai’s total trade. Now it is 10 per cent. And it is growing not only in percentage figures but volume as well,” he says.
“We believe that this 10 per cent is going to go to 15 per cent or 20 per cent in the coming five to 10 years. Again, this is fuelled by the growth in Africa and the demand.”
There are currently 12,000 African businesses registered with the chamber, a number that has been rising fast over the past few years. Many of them have been using Dubai as a base to attract investment into their own countries, says Buamim. “We have been collaborating with African countries in the past five years, creating big signature events for them,” he says.
“It has been very successful. We have been having a lot of investments announced. And this is where we allow the African countries to not only talk about the opportunities, but to also discuss the risks and challenges and how we can overcome them.”
Africa is a major focus area for financial institutions like Mashreq, which sees the potential in supporting trade between the UAE and the continent. There are a number of trading blocks in the continent, such as the oil driven economies of Nigeria, Angola, and Gabon. There is East Africa, which has traditionally focused on agriculture and dairy products, plus tea, coffee, flowers and tourism, and finally South Africa, which is to some extent comparable to the UAE.
This offers the UAE, and institutions like Mashreq, numerous possibilities going forward. “Mashreq has traditionally been a trade finance bank, doing everything to execute, to support and to finance trade, which we have done for more than 50 years,” says Sudmann.
“With the way the trade flows are going, and the way value chains are developing, there is a growing part Mashreq will play in financing these trade flows, mainly between Africa, India, China and Asia overall. We are very well connected to the African countries, to the major economies, and have all the ambitions to grow that.”