Trade between Africa and the United Arab Emirates goes back hundreds of years and there are strong enduring cultural ties, especially with the East coast of Africa. In more modern times, other international players have had greater economic infuence in the continent but over the last decade, the UAE has come roaring back and is likely to become one of Africa’s most important trading and investment partners. In this Special Report, our correspondent in Dubai, Heba Hashem examines the current business links between Africa and the UAE and how these are projected to increase in the near future.
Since gaining independence in 1971, the United Arab Emirates (UAE) has been advancing rapidly; propelled by great wealth from the discovery of oil and gas reserves in the 1950s. Up until then, Abu Dhabi was a simple fishing village with a fort, while Dubai, situated along the creek, was a trading hub, both inhabited by proud and resourceful nomadic tribes.
Having traditionally relied on fishing, pearling, camel herding and farming, it was hard to imagine that this oasis was about to be transformed into an international business hub. But visualising and achieving is the UAE’s greatest asset. Indeed, the spill-over effects of the oil discoveries galvanised every aspect of the economy, enabling bold visions to manifest into realities. Oil production revenues were invested into construction of schools, housing, hospitals and roads, and the economy escalated to compete on a global level.
Diversifying away from oil
Today, the UAE has one of the highest per capita incomes in the world, reaching $49,000 in 2012, and accounts for 24.3% of the region’s total trade. It is also the world’s sixth largest oil producer, with around 10% of the global known oil reserves – 90% of which lies in Abu Dhabi. But the late president Sheikh Zayed bin Sultan Al Nahyan warned his people during the oil rush, saying:
“Wealth is not money. Wealth lies in men. This is where true power lies”. Unless wealth is used in conjunction with knowledge to plan for its use, its fate is to diminish and to disappear.
This vision has become embedded in the country’s present plans, which seek to supplement oil revenues by establishing industrial activities, tourism, financial, distribution and logistics services, with the national objective of diversifying the economy to prepare for a post-oil era.
Out of the desert emerged a glittering skyline of residential and commercial towers, free trade zones and world-class hotels, and, on top of the sea, revolutionary island projects like the Palm Jumeirah and The World Islands were built.
Free zones lure regional headquarters
More than 20 free zones in Dubai offering 100% ownership, tax exemption on income and profits, and purpose-built offices and warehouse facilities have attracted international names across various industries. Dubai Healthcare City for example, brings together 120 high-quality medical facilities and 3,700 healthcare professionals, both national and international, to serve the country’s residents and visiting patients. The free zone regulates traditional and alternative medical practice, and is the only body regulating complementary and alternative medicine in the region.
Meanwhile, higher-education institutions ranging from leading universities to training centres and HR companies make up Dubai Knowledge Village and Dubai Academic City’s premises. The free zones comprise more than 400 educational institutions, including the University of Wollongong, British University, Middlesex University, American University, and Saint Petersburg State University of Engineering and Economics. As for media, entertainment and information technology companies, they are spoilt for choice in Dubai. Whether they choose to set up in Dubai Media City, Dubai Studio City, Dubai Internet City, or International Media Production Zone, they get access to premier facilities within a tax-free pro-business environment, which explains why the emirate has become a magnet for the regional headquarters of global industry players.
For business and financial institutions, Dubai International Financial Centre (DIFC) provides an on-shore platform that offers the same benefits as other free trade zones in Dubai, without restrictions on foreign exchange or capital repatriation. Formed as an independent jurisdiction under the UAE constitution, DIFC has its own courts, with judges taken from leading common law jurisdictions including England, Singapore and Hong Kong.
An advanced free zone that has attracted companies like Avaya, Fujitsu, Synopsis, and Schneider Electric is Dubai Silicon Oasis. Covering 7.3km², the technology park caters to the needs of high-tech industries, offering cutting-edge telecommunications, a fibre-optic network, and a superior utility infrastructure with eight power stations. This is to serve businesses operating in IT, telecom, mobile and internet technologies, biotech, automobile, aerospace, oil and gas, and many other hightech industries.
“Dubai Silicon Oasis is the ideal location to open Avaya’s dedicated training facility in the Middle East, Africa, and Turkey region, as it is the region’s primary hub for technology innovation,” Nidal Abou-Ltaif, Avaya’s vice president of Middle East, Africa and Turkey, said during the launch of Avaya’s new regional training centre in October 2012.
Cities within cities
In the property sector, the UAE has demonstrated exceptionally ambitious projects. One of the first developments to rise along the sea was Jumeirah Beach Residence, a $1.6bn waterfront community spread over 1.7km² with some 40 towers, which made it the largest single phase residential development in the world when it launched in 2002.
A few years later, Downtown Dubai was unveiled to the world. Stretching over 2km², the mixed-use complex is home to some of the city’s most important landmarks including Burj Khalifa – the centrepiece of the area – Dubai Mall, Burj Park Island, and Dubai Fountain. Altogether, the project is estimated to have cost $20bn. At the heart of Downtown Dubai, water regularly gushes out of the world’s largest choreographed fountain, which is set on the 30-acre man-made Burj Khalifa Lake. Business Bay, a central business district, is yet another project with ambitious targets.
Already featuring numerous skyscrapers and with the infrastructure completed, Business Bay will eventually have 240 residential and commercial buildings within landscaped gardens and a network of pathways and canals. “As the master developer and owner of this centrally located commercial, residential and retail hub, DPG has invested heavily in bringing the infrastructure foundations within Business Bay to the final stages”, Dubai Properties Group CEO Khalid Al Malik recently stated. The development is part of the vision of Sheikh Mohammed Bin Rashed Al Maktoum, UAE Vice-President, Prime Minister, Minister of Defence, and Ruler of Dubai, to create a city within Dubai city, along a new extension of Dubai Creek extending from Ras Al Khor to Sheikh Zayed Road.
“Dubai’s success is an extension of Abu Dhabi’s success and vice-versa. The same dynamic applies to the other emirates; Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah. The union of these seven emirates represents an unshakable force and an impregnable fortress that cannot be weakened by challenges”, Sheikh Mohammed states on his official website.
Sky is the limit for logistics projects
About five decades ago, the UAE had no international airports. Today it is home to six international airports, and a seventh that is set to become the world’s largest. The country has also seen the launch of two major airlines –
Emirates Airlines and Eithad Airways – with extensive routes covering the African continent and two budget carriers – Air Arabia and Fly Dubai. Over the last decade, Emirates has made some of the largest aircraft purchases ever, including a historic civil aviation order in 2007 for 120 Airbus A350s, 11 A380s and 12 Boeing 777-300ERs, together worth an estimated $34.9bn, and in 2011, the airline opened Dubai Airshow with a whopping $26bn order for 70 Boeing 777-300 ER aircraft.
When Emirates Airlines was first conceived in 1985, it was based at the Dubai International Airport- a fairly small base at the time handling a few carriers. In January 2013, the airport was ranked as the world’s third busiest, handling 75m passengers, and serving 145 airlines flying to more than 260 destinations.
“January’s record passenger numbers confirm that the growth trajectory recorded last year has continued into 2013 and Dubai Airports has taken another steady stride towards the 98m passengers a year we expect to pass through our airport by the end of the decade,” said Dubai Airports CEO, Paul Griffiths.
The UAE also boasts two major transportation and logistics successes. DP World, the largest marine terminal and port operator in the Middle East, operates more than 60 terminals across six continents and has a workforce of nearly 30,000 people. DP World manages container, bulk and other terminal cargo in some of the world’s most dynamic economies, in addition to investing in terminal infrastructure and facilities at its own ports across the emirate.
In Abu Dhabi, the UAE’s maritime history began a new era with the launch of the $7.2bn Khalifa Port last December. The new port has the first semi-automated container terminal in the region – the only one for 5,000 kilometres – and offers direct access to all companies in Khalifa Industrial Zone Abu Dhabi (Kizad), the vast new industrial zone adjacent to Khalifa Port. “Khalifa Port and Kizad offer global businesses an unbeatable combination of low operating costs, access to global markets and an environment which makes doing business easy,” states Dr. Sultan Ahmed Al Jaber, chairman of the Abu Dhabi Ports Company.
Renewable energy priority
A few years ago, Abu Dhabi embarked on a two-decade programme to transform its economy from one based on natural resources to one based on knowledge and innovation. Guiding this transformation is the Abu Dhabi Economic Vision 2030; a comprehensive plan that aims to increase the non-oil share of the economy from 40% to more than 60% by 2030.
In line with this vision, Masdar was established. Consisting of five integrated units, Masdar Institute, Masdar Capital, Masdar Power, Masdar Carbon and Masdar City will collectively transform the capital from a technology importer to a technology exporter, and into a source of renewable energy knowledge and development. Masdar’s Shams 1, the country’s first concentrated solar power plant and the world’s largest at 100 megawatts, was launched in March 2013, while Noor 1 PV facility, will add another 100 megawatts when it comes online later this year. Such power projects prove the country’s determination to diversify itself away from oil, while Masdar City aims to create a sustainable urban development and a clean-tech cluster where businesses can thrive and flourish.
“Expanding our leadership into renewable sources of power demonstrates the United Arab Emirates’ commitment to maintaining its position as a major provider of energy. The domestic production of renewable energy extends the life of our country’s valuable hydrocarbon resources and supports the growth of a promising new industry,” said His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi.
As demonstrated from the following table, thanks to the bold – and ambitious – vision of its leaders, the UAE continues to see more successful projects completed, and an ever growing pipeline of new ones.