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Saudi investment in Africa

Africa is changing. It is no longer a hopeless economic sinkhole ruled by venal military dictators and plundered by international business.
After half a century of misrule and endemic corruption, there is a new mood abroad in this continent of 54 nations and over one billion people, of whom around a third is under 21 years old.

The trigger for this change has been the emergence, over the last 20 years, of an aspirational middle class, which is less interested in the usually short-term benefits of political power or a position in a bureaucracy which does nothing without a kickback. Instead Africa's new bourgeoisie is looking to profitable investments in sustainable commercial ventures, which can be protected by the courts and public opinion from arbitrary interference by politicians or the authorities.

Though this transformation clearly has far to go, the first shoots of change have already developed into strong young plants. Nigeria's reputation as Africa's corruption capital may be about to change with the prosecution of eight bank bosses for fraud and the indictment of senior politicians for graft, by the administration of President Goodluck Jonathan. Even a decade ago, such prosecutions were almost unthinkable. Among the most significant prizes in the anti-graft drive has been former vice president and once powerful provincial governor James Onanefe Ibori. This week he pleaded guilty in a British court to money laundering after being arrested and extradited to the UK by Dubai. 

Chinese investments, though still regarded by some in Africa with deep suspicion, have created jobs and boosted economic activity. Beijing makes little secret that its primary interest is the continent's natural resources. However, by and large, the Chinese have no political ax to grind and their involvement in Africa is not seen, even by Western powers, as being neo-colonialist. Indeed, history may show that one of China's most significant contributions to the continent was the gift of the new African Union headquarters in Addis Ababa, where the successor to the Organization of African Unity held its annual summit last month. This key forum is already finding a voice and establishing a secretariat that has far more to do than shuffle papers and issue vacuous and absurdly optimistic reports. With the old OAU, many of Africa's  dictators sent only their deputies to summits, for fear of being overthrown while they were away. The AU, now celebrating its tenth year anniversary, is a far more coherent and focused organization with blueprints for closer cooperation and economic and political integration among member states that no longer seem fanciful.

Saudi Arabia has made a point of looking to develop stronger and broader ties with Asia, most particularly China and India. Nevertheless, it is clear that great opportunities also exist in Africa, not simply to earn investment returns, but also to generate faster growth on the continent, which eventually will be of great benefit to the rest of the world.

It is therefore extremely encouraging that one Saudi businessman, Mohammed Al-Amoudi, plans to invest no less than $3.4 billion in Ethiopian cement, steel, agricultural and transport operations over the next five years.  Many will say that despite Ethiopia's continuing stability, this investment still carries high risk. Yet wise investors will have appreciated the sea change that is taking place on the continent. Every investment carries risk, which is why it deserves the appropriate level of reward, but the key consideration for a growing number of countries in Africa is that this risk, once phenomenally high, is being reduced steadily.  Africa is cleaning up its reputation as a commercial disaster zone. It has both growing consumer markets and an Internet-driven economy based on high speed broadband and mobile telecommunications which have leap-frogged a generation of technology.

Saudi Arabia and its GCC neighbors are extremely well placed to play a part in Africa's economic coming of age. It would seem unlikely that Al-Amoudi's considerable investment in the continent will be the last from our region.

© Arab News 2012

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