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ECONOMY: Africa Is of ‘‘Strategic Importance’’ to Gulf States

Stephanie Nieuwoudt

CAPE TOWN, Feb 27 2009 (IPS) - According to a recent article in the Harvard Business Review, the average annual return on investment in Africa is between 65 and 70 percent higher than in any other country, including China.

However, according to Peter Croll, director of the Bonn International Centre for Conversion (BICC), the media often does not portray the correct picture of Africa. And this has negative consequences for the way potential investors view Africa as an investment region. The BICC is a German research institute promoting peace and development.

Croll was speaking at a two-day Gulf-Africa strategy forum held in Cape Town. The purpose of the conference, hosted by the Saudi-Arabian think tank the Gulf Research Centre, was to find a way forward in which Gulf and African states could work together to form stronger political and economic ties.

Close to 200 international, African and Middle Eastern businesspeople and politicians attended the conference. The conference ended on Feb 25.

Media reports often portray African and Gulf countries as beset with disease epidemics, poverty and violence. Croll proposed that, in an effort to counter negative perceptions, thought should be given to the establishment of a global media forum through which not only the negative, but also the positive stories of Africa could be told.

He added that investors have to feel safe and believe that they are free of security threats in order to invest in a particular country.

Both regions have experienced terrorism and countries in both regions have been torn apart by seemingly endless wars. There has also been an increase in piracy in African waters as well as in the Gulf of Aden and an increase in human trafficking.

Tanzania’s minister of industry, trade and marketing, Mary Nagu, said that Chinese investors in Africa often approach the problems of Africa differently to investors from other countries. For example, when there is no infrastructure in an area they want to invest in, they ensure that the infrastructure in put in place.

They will build roads to ensure that goods can be transported.

‘‘Potential investors in Africa have to get to know the continent, its unique people and its problems before they decide to invest here,’’ Nagu explained. ‘‘Investors have to accept all the challenges the continent faces. Africa is not one country. It is a continent with many diverse countries, people and cultures.’’

A number of speakers mentioned the dearth in infrastructure as a major challenge to investing in Africa. There were calls for the establishment of maritime and air links between African and Gulf countries.

Gulf countries have already invested in a number of transportation projects.

According to the Khaleej Times, Dubai Port World opened the largest and most modern container terminal in East Africa in Djibouti earlier this month. The United Arab Emirates invested one billion dollars in the development of housing, ports and tourism in that tiny east African country in 2007.

In 2008 Qatar Airways initiated flights to Uganda in an effort to improve the airline’s market share on the continent.

The Kenyan president, Mwai Kibaki, has started negotiations with Qatar for a 34,5 billion dollar loan to build a new port for Lamu, an island off the Kenyan coast.

According to Marie Bos, a researcher at the Gulf Research Centre, many African countries has shown consistent growth in gross domestic product (GDP) of, on average, five percent over the last five years, mainly due to foreign direct investment (FDI) which reached 53 billion dollars in 2007.

But in many cases the money does not translate into the alleviation of poverty. It is therefore important to ensure that aid to Africa be channelled in the right way to the relevant beneficiaries. According to Bos, there are two major reasons why Gulf states should provide ‘‘abundant aid’’ to Africa.

First, Africa is becoming an important economic partner and, second, it is essential for Gulf states to have a stable neighbour.

According to the United Nations’ Financial Tracking System (FTS) of worldwide humanitarian assistance, Gulf states channelled 5.8 million dollars in aid to Africa in 2008.

But, according to Bos, the FTS did not capture the true value of Gulf aid as it is often not reported. As an example, the Kuwait Fund for Arab Economic Development donated more than 210 million dollars to African countries in this year.

‘‘It is expected that the volume of aid will decrease in 2009 as a result of the financial crisis. This does not mean that the focus will shift away from Africa as the strategic importance of the region remains,’’ stated Bos.

Bos further argues that as Africa has become key in the international race for natural resources, Gulf states have to view Africa as a long-term partner and not as a quick fix for immediate needs.

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