INTERVIEW- Gulf investors should look to Africa for returns, says law firm boss

African Legal Network founder says Gulf businesses can find opportunities in infrastructure, agriculture and consumer goods

  
A panel debate gets under way at the 2017 Africa Legal Network annual investment conference in Dubai.

A panel debate gets under way at the 2017 Africa Legal Network annual investment conference in Dubai.

Africa Legal Network/Handout via Thomson Reuters Zawya
Investors from Gulf Cooperation Council (GCC) countries should consider investment opportunities in infrastructure, agricultural and consumers’ goods in African states, according to one of the organisers of a Dubai-hosted annual conference on business opportunities in Africa.

Karim Anjarwalla, the managing partner of the Kenyan corporate law firm Anjarwalla & Khanna and one of the organizers of the Africa Legal Network (ALN) conference that is currently being held in Dubai, told Zawya in an interview on Wednesday that Africa offers growth prospects for GCC investors, especially when home markets are reporting weaker growth following a plunge in oil revenues that began in mid-2014.

“We are a continent of one billion people. We have a vast amount of arable land, we have mineral wealth, which cannot be compared to any other place in the world and young population and in many places highly literate population,” Anjarwalla said speaking on the sidelines of the fourth annual ALN conference.

When asked about the specific sectors that the GCC businessmen should consider in Africa, he said: “Infrastructure, this is a clear opportunity whether roads… power. But it requires a long term mindset because the returns of infrastructure are long term and requires trust in governments.”

Other investments opportunities, according to Anjarwalla, could also be found in the agriculture sector as well as in other consumers’ goods such as hair products, alcoholic drinks and beverages.

“Eight of the 10 most growing economies in the last decade were in Africa,” Anjarwalla said. “Ethiopia is one of them, Rwanda is another one,” he added. The Sub-Saharan African region is forecast to grow by 2.6 percent, according to the International Monetary Fund (IMF).  

Dubai has taken a keen interest in developing trade links with Africa. Dubai Chamber of Commerce and Industry has in recent years opened representative offices in four African countries: Ethiopia, Ghana, Kenya and Mozambique. In March this year, Dubai Chamber chairman Majid Saif Al Ghurair, told an African investment conference in London that Gulf countries have invested about $30 billion in African infrastructure projects over the past decade.

Dubai-based Dodsal Group also in March last year announced that exploration work on three onshore gas fields it owns in Tanzania had revealed that they hold reserves that are likely to be worth $8 billion. The fields will be developed in a joint venture with its state-owned partner, Tanzania Petroleum Development Corporation.

Corruption
Corruption and red tape are considered the two biggest barriers facing business opportunities in Africa.  Most of the African states - in both northern and southern parts of the continent - score low on the transparency international index that measures corruption levels in 175 international countries. Rwanda was ranked number 50 in the 2016 index, while Angola was 164th and Libya held the 170th position.

Anjarwalla said that in the recent years many African countries had adopted technological developments that helped them curb corruption and bureaucracy.

“One cannot pretend there is no corruption. But then there are plenty of global corporates who operate today in Africa and I would like to think they have found a way to operate without being corrupt,” Anjarwalla said.

“Overall, the  quality of governments in Africa had advanced dramatically and also facilitated technologies,” added Anjarwalla, who said the ALN annual conference organised by law firms provides risk assessments for businesspeople interested in exploring opportunities in Africa.

Anjarwalla said that five years ago people in Kenya needed to stand in long queues to issue or renew any official documents or complete services at a government entity, and sometimes needed to pay bribes to speed up the process.

“Now in Kenya, everything is online. I pay my taxes online and I apply for my passport online. I can pay my power bills, water bills on online portals... Same for visas, you can apply for a visa online,” Anjarwalla said.

Opportunities and Challenges
Anjarwalla, whose firm specialises in advising on mergers and acquisitions, said the African continent also offers attractive acquisition opportunities, adding that in recent years several GCC companies had acquired stakes in Sub-Saharan African firms such as the UAE’s Al-Futtaim Auto group’s acquisition of Kenya’s CMC motors in 2014.

 “The beauty of Africa is that we have massive trading blocs which allows for free movements of goods and services,” Anjarwalla said, adding that the free trade agreements offer an incentive for companies when they buy a local firm or open a new one, as it allow them an easy entrance to other African countries.

The Common Market for Eastern and Southern Africa (COMESA) is considered one of the biggest trade blocs in Africa. It includes 19 states, covering a population of nearly 390 million, according to the official COMESA website.

According to Anjarwalla, COMESA and other trade blocs between African countries facilitates the mobility of goods and services across borders.

“So a manufacturer based in Kenya can manufacture in Kenya and export to Uganda, Tanzania, Rwanda and Burundi... without imposition of duties. There is that ability to scale beyond the national geography in Africa,” Anjarwalla said.

He said one of the main challenges facing GCC’s investments expansions in Africa is the lack of understanding of the local markets and the difference between the various African states.

“I sometimes fear that Africa is seen as a country, not a continent. You know, investing in Yemen will be very different from investing in Oman, although they are neighbors. Saudi Arabia is different from the UAE,” Anjarwalla said.

“Africa is the same, countries are different and I think investors need to understand that and appreciate the difference and the strengths and weaknesses between the different markets,” he added.

Another challenge, according to Anjarwalla, is a cultural one.

“Like investing in any new market, (there is a) need to understand that what might work in Dubai might not work in Dakar,” Anjarwalla said, advising GCC investors to consider local partners when entering the African markets.

VAT
Anjarwalla described the first of its kind introduction of excise and value-added taxes in the UAE and Saudi Arabia “a hugely positive thing”.

Both states have recently introduced excise tax, and said will implement a new value added tax (VAT) regime from January 1. All GCC states agreed last year to introduce VAT as a means to diversify their economic revenues.

“It (the introduction of the new taxes) means these economies are going beyond oil and understand that in order to meet the aspiration of their people they need to raise revenues,” Anjarwalla said.

“In the old days you can fund economies through oil but those days are gone and gone forever,” he added.

Anjarwalla said one of the advantages of taxes is that they create “social cohesion”.

“When people pay tax to a country they get a sense of loyalty to this country and a sense of duty from the state to its citizens.”

© ZAWYA 2017

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