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Gulf region petro-dollars flow into Africa

Aided by growing trade links, the oil-rich Gulf region has begun parking its petro-dollar investments next door in Africa, which otherwise found their way to the UK and US and off late to India and China.

The Gulf nations have pumped in an estimated $140 billion into overseas investments in the last three years, a small but increasing component of it, set aside for the Dark Continent, where the investment climate has brightened up like never before. And the rush to Africa has just begun, particularly in the commodities, telecom and energy sectors. In its recent report, Merrill Lynch gave a bullish forecast for the continent dubbing it the final frontier. Listing out the top ten investment opportunities, it said oil and commodities top the list while telecommunications and information technology would provide significant returns for investors.

Reports on the growing Middle East interest in Africa said Gulf investors were eyeing stakes in a bank and telecom company from Ivory Coast-based Groupe Atlantique to tap business in West Africa. An Arab bank is said to be finalizing a minority stake deal in the Ivorian company’s Banque Atlantique unit while two Gulf Arab firms were competing for a stake in affiliate Atlantique Telecom. Telecom companies including Kuwait’s Mobile Telecommunications, Saudi Arabia’s Oger Telecom and Abu Dhabi’s Etisalat have led the influx to Africa. MTC bought Celtel, a mobile phone provider in 13 African countries, for $3.4 billion in 2005.

The emerging markets were also feeding businesses into Africa. Investors from China, India, Russia and the Middle East do not like to invest in credit default swaps and financial tools of Western banks, but rather in real assets, which Africa offers ata a discount, a recent report from investment consulting firm, RogersCasey, said. What more, the Shar’ia-compliant opportunities that Africa’s commodities offer were an added incentive for the Middle East investors. Tanzania and Cairo were building Islamic financial centres along with Malaysia and Dubai and urging investors to come their way. “Petrodollars parked in London global banks are increasingly being invested in sharia’a-compliant structures. These monies will not necessarily come back into the Western financial system in the ways they did 20 years ago. At the heart of the sharia’a compliant monetary system is the concept that tangible assets are preferred,” he said.

There has also been a trend of increased cross-border investment within the Gulf and larger MENA regions. Part of the reason behind this trend is a post-9/11 sentiment in the Arab world that the West, and especially the US, is unwelcoming of Arab investment. China’s initiatives in Africa investing in new infrastructure and providing soft loans to secure access to its mineral and oil wealth has come in for criticism. India’s has been a low profile entry but its trade with Africa has been growing by nearly 25% annually in recent years. (menafn.com)