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FT SPECIAL REPORT New Trade Routes Middle East­Africa Tuesday November 26 2013 www.ft.com/reports | @ftreports Deep roots Inside » foster a new Flying high Airlines are attracted by the commercial fat margins on African routes Page 2 relationship Border snarl­ups Red tape and corruption hamper flow of import and Barriers to business in Africa may be daunting, export goods but groups are optimistic trade will grow and Page 3 diversify, writes Shawn Donnan On the hoof: Somali camels are hoisted at Mogadishu port for export to Saudi Arabia (see story page 4) Getty Ancient links rade between Africa and the Africa. Dubai’s DP World has been airport in Africa will be painfully total livestock exports from those ter- Governments are reducing waiting Dubai banks Middle East has deep histori- investing in African ports while Mid- aware that the continent still faces ritories, which have been recovering times at borders and cracking down rekindle ties of old cal roots. The Egyptian phar- dle Eastern airlines are staking claims challenges and has a long way to go from a shattering civil war, rose to on corruption. Yet those efforts are aoh Necho first commis- on the continent: Emirates, Etihad, before it catches up with the rising 4.8m in 2012. often faltering at best and one of the as Africa expands sioned Phoenician mariners and Qatar Airways have all increased economies of Asia. The ride in from Africa remains a challenging envi- biggest challenges is to break down global trade Tto circumnavigate the continent in the frequency of their flights to Africa the airport in Lagos is still a more ronment and the barriers to trade are barriers within the continent that 600BC, while centuries later Muslim in recent years. tortured affair than the one investors often daunting, even though the mood limit intra-regional trade. Page 2 traders from the Middle East brought They are also positioning Gulf hubs, experience in Jakarta, let alone in is one of optimism. Paul Brenton, For Africa, even as new partners Islam to Africa. including Dubai and Doha, as the nat- Beijing. trade practice leader for the World join long-time players, the real prom- And the highly prized camels of ural linking points on the flights from But the attraction is strong. Africa Bank in Africa and co-editor of the ise lies in trading within the conti- Telecoms calling Sudan and Somalia, first brought west Asia to Africa. And Flydubai, a low- is now home to a rising middle class recent book De-fragmenting Africa, nent, Mr Brenton points out. “Increas- from Arabia to carry loads across the cost start-up, is offering direct serv- that is beginning to consume with says: “People are perceiving a much ing regional trade is still the best way Middle East and African deserts, have for centuries ices to secondary destinations such as gusto. wider range of opportunities in Africa. into diversification and away from a rival operators see been traded back to the Gulf to be Djibouti and South Sudan. When the Dubai-based Abraaj A much more diverse set of interests dependence on resources,” he says. raced, milked or eaten at banquets. At the heart of the new relationship Group in June paid a reported $350m is now thinking of trading with More than two millennia after the continent as next The historical relationship remains are the changing fortunes of Africa. for Fan Milk, which operates in seven Africa.” Middle East and Africa began to big opportunity strong. Go to Jeddah, Saudi Arabia’s The IMF now predicts the region will west African countries, Arif Naqvi, Efforts are being made to address trade, the signs are that there is scope port on the Red Sea and before long be the fastest growing in the world in Abraaj’s founder and group chief the problems that for so long have for deepening those historical links to Page 4 you will encounter traders from the 2014, behind only Asia. Some of its executive, was clear on the lure. made trading with Africa difficult. make the most of the new conditions. Horn of Africa. Go shopping in Dubai more dynamic economies – such as Africa is “witnessing the rise of a bur- and you will inevitably find yourself Ghana and Nigeria – are growing at geoning middle and consumer class”, alongside Nigerian entrepreneurs. Mr Naqvi said, making it “an Venture into Africa’s hinterlands and extremely exciting and compelling there are strong odds you will run investment opportunity”. into a Lebanese trader whose family Governments are Leading the Gulf private equity has done business for generations. reducing waiting times at push into the region, Abraaj has Yet, as Africa’s economy surges, the already sunk more than $2.2bn into nature of commerce between the two borders and cracking 70 companies across Africa. And it is changing. If Africa is at a cross- sees further opportunities, says part- roads, then so, too, is its relationship down on corruption ner Jacob Kholi, a Ghanaian who is a with its oldest trading partner. former KPMG accountant based in The traders of the Middle East have Accra. “The African market is still history – and capital – on their side. rates comparable to the big emerging underpenetrated and valuations are But in recent decades they have been economies of the world. good,” says Mr Kholi, who sees the supplanted: China, Europe and the US When Jim O’Neill, the former Gold- food sector as particularly attractive, now dominate the trade in goods with man Sachs economist who coined the but also “fantastic potential” across Africa. And new entrants such as Tur- acronym Brics to characterise the various other sectors and countries. key are making bold forays into the economies of Brazil, Russia, India and For other Middle Eastern investors continent: last year, Turkish Airlines China, addresses audiences these days the appeal goes beyond the increas- launched a twice-weekly service from he often uses another acronym: the ingly empowered consumer: they are Istanbul to Mogadishu, the first for Mint economies – those of Mexico, looking to Africa’s infrastructure. more than 20 years. Indonesia, Nigeria and Turkey. DP World, one of the world’s lead- But although agricultural commodi- To leave Africa out of the mix now ing groups, now operates eight marine ties and raw materials still dominate would be unthinkable. terminals in five countries, including Africa’s exports to the Middle East One of the key features of the Djibouti, Senegal and Mozambique. and oil the return journey, the traders changing relationship between the Such port facilities are transit points from the Gulf, north Africa and the Middle East and Africa is the way for the growing volume of agricultural Levant who have for centuries built African business people are using goods exported from Africa to the links with their African partners, are bases in the Gulf such as Dubai, or Middle East, reflecting the growth in focusing on new investments and Middle Eastern banks, to finance their Arab investment in African land. opportunities. operations, especially as those banks Somalia and its breakaway territory Gulf private equity groups are buy- increase their presence in Africa to of Somaliland exceeded records last ing up African companies with an eye serve a growing list of clients from year when they jointly exported about on the future. Banks are seeing oppor- China, Europe and beyond. 3m sheep to the Middle East. With tunities in the rising economies of However, anyone arriving at an goats, cattle and camels added to that, Emirate moves with the times Profile shadow of the Burj Khalifa an entrepot centre. Traders where global businesses skyscraper. would purchase goods headquarter their regional Dubai For Mr Thakkar, who wholesale from Asia, operations for Africa, spends on average 20 days breaking up the large remains a shop window to Location and ease of a month travelling, the shipments and re-exporting the world for traders from emirate is the ideal them or selling them to Africa, as well as its other operating win out, location to co-ordinate a businessmen such as Mr target markets in the says Simeon Kerr business spanning Africa Thakkar. Middle East, central and and India. Now, he says, the city south Asia. “Dubai,” he says, “is a has evolved into a African traders have long Ashish Thakkar quit brilliant transit point that financial and operational recognised the city’s school in Uganda in 1996, connects Africa so well to hub, moving from “goods wholesale markets as an aged 15. He took out a Asia and Europe.” to people”. Global ideal location to source $5,000 loan, half of which Africans face difficulties businesses, especially goods for the continent. he used to buy a ticket to in securing visas to travel Chinese companies, are Dubai’s trade with Africa Dubai. elsewhere on the continent, also settling on Dubai as grew to $30bn in 2012, up The UK-educated Indian, while foreign businessmen the ideal launch pad for 27 per cent on the previous and former Rwandan travelling into Africa can African operations. year. Sub-Saharan refugee, used the rest of also face bureaucratic Four of China’s largest countries leading the the loan to buy IT headaches. banks have set up in growth include Ghana, equipment from Dubai’s London and South Africa Dubai International Tanzania and Angola. informal computer market. act as Dubai’s main Financial Centre, while Over the past five years, As business grew, he was competitors, while Nairobi trading houses are also bilateral trade has risen told the only way he could is also emerging as an east using the city as their from 6 per cent of Dubai’s raise credit was to set up a African hub.

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