When Jeffrey Singer, former President of the Dubai International Financial Center (DIFC), sat down with senior Dubai-based executives from 15 of the world’s largest banks for a breakfast meeting a few months ago, he asked them a simple question: “what is on your mind?”
The answer was unanimous: Africa.
“They were all pursuing deals in Africa, and all wanted to know how we could support them,” Singer said. “They see significant deal flow in Africa, in mining, agriculture, infrastructure, telecommunications, and a wide variety of sectors, and they are looking to finance those deals.”[1] And as Singer noted, it’s not just major global multinational banks. Chinese and Indian banks also see Dubai as a hub for Africa. “We have four of the top Chinese banks. The top 20 banks from India, in DIFC. Take Bank of India, the largest, DIFC. Why? Ask them: Africa!”[2]
The fact that the “regional”[3] heads of some of the world’s biggest banks would find it natural to talk about expanding into Africa from Dubai reflects a new geo-economic and geo-commercial reality: Dubai’s emerging gateway status to Africa, via sea, air, and now finance links.
Dubai is strategically located at the heart of several new trade corridors, including the SAMEA corridor of some 3 billion people – South Asia, Middle East, and Africa – as well as the CHIMEA corridor (China, India, Middle East, Africa) of more than 3.5 billion people. It also has increasingly become a hub of the “New Triple-A” growth economies in Africa, the Americas, and Asia.
As Asia grows in importance, so, too, do Asia’s key hub cities, linking Asia to the Middle East and Africa. Ben Simpenforder, author of the illuminating book, The New Silk Road, points out that the three key trading hubs of Dubai, Hong Kong, and Singapore “already play an outsized role” linking the Middle East, East Asia, and Africa and “their importance is expected to grow within the region and globally.”
The city-state’s transport and logistics infrastructure has made it a powerful trade enabler. Dubai has emerged as a globally recognized hub – of people, goods, services. Every 90 seconds, a plane takes off or lands in Dubai. Every minute, 100 containers land in Dubai ports. Every day, more than 30,000 international visitors arrive in Dubai. The city ranks 7th in the world in terms of international visitors, ahead of Hong Kong, Rome, Shanghai, Amsterdam, Tokyo, and Los Angeles.[4]
Recently, Forbes magazine named Dubai the 7th most influential city in the world, owing a great deal to its global connectivity and its role as a hub connecting other regions of the world. Dubai ranked first in the world in terms of air connectivity, beating out London, New York, Singapore, and Hong Kong. The author of the piece, Joel Kotkin, a world renown specialist on cities, also saw great potential in Abu Dhabi, ranking it as the 20th most influential city in the world, on par with Shanghai.[5]
The authors of the report noted eight factors in quantifying a city’s influence: “the amount of foreign direct investment they have attracted; the concentration of corporate headquarters; how many particular business niches they dominate; air connectivity (ease of travel to other global cities); strength of producer services; financial services; technology and media power; and racial diversity.”[6]
While Dubai was ranked number one in terms of air connectivity, its ports, too, would rank among the most connected in the world. Dubai’s Jebel Ali Port is a shipping colossus, among the top ten busiest container terminal ports in the world and the largest between Rotterdam and Singapore (with more activity than Rotterdam). Virtually all of the major global shipping lines call on Jebel Ali, making it one of the world’s most important transshipment hubs, and an important feeder to African markets. No other Middle East port come close to Jebel Ali’s global shipping penetration.
Obviously, all of that cargo is not headed for Dubai, a city of just over 2 million people. Jebel Ali is a major re-export center, including to Africa. The global confectionary Nestle uses Dubai as its Africa headquarters, owing mostly to the world-class warehousing and shipping connections available in the Jebel Ali Port. Louis Dreyfus, one of the world’s largest commodity traders, and MiDCOM Group, the largest Nokia distributor in Africa and the Middle East region, all base their Africa office in Dubai.[7] Global carmakers operate central replacement parts warehouses in Dubai as well as the emirate of Sharjah to cover Africa.
China’s global telecoms company, Huawei, recently opened a logistics facility in Dubai’s Jebel Ali port and free zone to serve Pakistan, the Gulf Cooperation Council (GCC) states, and Africa. Jebel Ali has become a central hub of China’s exports to the Middle East and Africa. “The UAE has served as a central logistics hub through which to support more and more of our customers across the African continent,” Peng Xionji, UAE General Manager of Huawei, was quoted as saying.[8]
As a result, trade and investment ties between the UAE and Africa have seen exponential growth. Since 2002, Dubai’s non-oil trade with Africa has grown more than 700%. From 2008 to 2013, Dubai’s trade with Africa grew by 141%, hitting $25 billion, according to the Dubai Chamber of Commerce and Industry (DCCI). Much of that trade comes from re-exports, from Dubai ports to the African continent. “This makes Africa the fastest-growing market as a group for Dubai,” says Hamad Buamim, Director General of the Dubai Chamber of Commerce and Industry. “It is a very important export market for consumer goods.”[9] Buamim is leading an aggressive charge for more robust links with Africa with office openings planned across the continent.
Another key driver of the rising Dubai-Africa trade are a new generation of African traders and migrants using Dubai as their base to trade with the continent. They are using Dubai in much the same way mainland Chinese traders used Hong Kong or Singapore in the 80s and 90s: a place to trade more efficiently with the “mainland.”
As the scholar Akbar Keshodkar notes: “One of the major attractions Dubai offers to traders from Africa is that it has developed as a prominent location for goods transit and re-export, efficiently facilitating re-distribution of goods throughout the region.” In a study of Zanzibari migrants to Dubai, Keshodkar noted that Dubai competes directly with Guangzhou, China, a major center where African merchants source goods.[10]
Keshodkar also pointed out Dubai’s soft lure: African traders simply like visiting the city. His research found that African traders who travel to Dubai tend to have a high estimation of the city and also enjoy its social freedoms. “Dubai is perceived by Africans as a modernized city, with its ultramodern appearance, developed infrastructure and visible prosperity, where they can experience high level of mobility.”[11]
This positive perception has led many African traders to prefer goods sourced in Dubai over China, even if those goods are made in China. As Keshodkar notes, “a common perception prevails among African consumers that goods from China are cheaper and accordingly of lower quality which last for a short period, but goods coming from Dubai are of higher quality and last longer.” This has partly fueled the rise of Chinese traders from Guangzhou setting up wholesale centers in Dubai “where African traders can now acquire their goods without having to travel to China.”[12]
Dubai’s government has developed a multi-pronged strategy to continue to grow this relationship. The Dubai Chamber of Commerce is leading an effort to attract African businesses or Africa-facing companies to Dubai. African company membership in the Dubai Chamber has increased from 2914 companies in 2008 to 7,906 through mid-2014, a 171% growth rate.[13]
On September 9, 2014, UAE Prime Minister and Dubai Ruler Sheikh Mohammed bin Rashid al Maktoum hosted six heads of state from West Africa, as well as senior officials for a West Africa Forum that led to pledges of some $19 billion in much-needed infrastructure investments by UAE companies in 17 projects spanning railways, roads, bridges, and power stations. Given Africa’s enormous infrastructure deficit, this marks an important milestone in UAE-Africa ties.