November 25, 2013 12:51 pm

Dubai becomes centre for Mideast-Africa trade

Ashish Thakkar

Ashish Thakkar

Ashish Thakkar quit school in Uganda in 1996, aged 15. He took out a $5,000 loan, half of which he used to buy a ticket to Dubai.

The UK-educated Indian, and former Rwandan refugee, used the rest of the loan to buy IT equipment from Dubai’s informal computer market.

As business grew, he was told the only way he could raise credit was to set up a company in Dubai.

Now known as Mara Group, his creation has evolved from IT into a pan-continental conglomerate, spanning real estate and call centres, consumer goods packaging, glass manufacturing and agriculture.

Mara has offices across 21 countries and 8,000 employees, some 60 of them in its three Dubai offices, including a group headquarters in the shadow of the Burj Khalifa skyscraper.

For Mr Thakkar, who spends on average 20 days a month travelling, the emirate is the ideal location to co-ordinate a business spanning Africa and India.

“Dubai,” he says, “is a brilliant transit point that connects Africa so well to Asia and Europe.”

Africans face difficulties in securing visas to travel elsewhere on the continent, while foreign businessmen travelling into Africa can also face bureaucratic headaches.

London and South Africa act as Dubai’s main competitors, while Nairobi is also emerging as an east African hub.

But tax-free Dubai wins in terms of ease of business, Mr Thakkar says. “Getting visit or work permits is a hassle in a lot of these countries,” he adds. “Here, we take it for granted. With notice of three days, I know it will happen. The last thing you need as a bottleneck.”

In the early 1990s, Dubai was still largely an entrepot centre. Traders would purchase goods wholesale from Asia, breaking up the large shipments and re-exporting them or selling them to businessmen such as Mr Thakkar.

Now, he says, the city has evolved into a financial and operational hub, moving from “goods to people”. Global businesses, especially Chinese companies, are also settling on Dubai as the ideal launch pad for African operations.

Four of China’s largest banks have set up in Dubai International Financial Centre, while trading houses are also using the city as their headquarters for Africa.

Dubai, while increasingly the location where global businesses headquarter their regional operations for Africa, remains a shop window to the world for traders from Africa, as well as its other target markets in the Middle East, central and south Asia.

African traders have long recognised the city’s wholesale markets as an ideal location to source goods for the continent.

Dubai’s trade with Africa grew to $30bn in 2012, up 27 per cent on the previous year. Sub-Saharan countries leading the growth include Ghana, Tanzania and Angola.

Over the past five years, bilateral trade has risen from 6 per cent of Dubai’s overall trade, at about $10bn, to 10 per cent of the city’s overall trade.

“This makes Africa the fastest-growing market as a group for Dubai,” says Hamad Buamim, chief executive of the Dubai Chamber of Commerce and Industry. “It is a very important export market for consumer goods.”

The DCCI last year opened a trade office in Ethiopia, helping to drive a 100 per cent increase in bilateral trade with the east African nation.

Mr Buamim is now in talks to open similar trade-promotion bureaux in Nigeria, South Africa, Angola, Kenya and Ghana.

Dubai-based business people are also increasingly looking to invest in Africa. Mohamed Alabbar, the chairman of Dubai real estate group Emaar, in 2011 set up a commodities-oriented pan-African group, Africa Middle East Resources, with partners including Malaysian billionaire Syed Mokhtar al-Bukhary.

Targeting commodities business in Guinea-Conakry, Niger and Mauritania, Mr Alabbar is also now looking to move into real estate development in countries such as Ghana, Nigeria and Uganda.

But the fundamental building block of Dubai’s economy has always been trade, first serving as a tax-free port at the turn of the 20th century.

Even after the city slipped into recession as its real estate bubble burst in 2008, its trading infrastructure – from massive ports to busy airports – allowed the entrepôt to bounce back relatively quickly.

Dubai, after progressive expansion of its seaport capacity, is now transforming itself into an “aeropolis”, with two airports joining the emirate’s ports as the economy’s main drivers.

African air traffic into Dubai’s growing city-centre airport grew at 18.2 per cent over the past year and now accounts for about 10 per cent of passengers.

Fast-growing Emirates Airlines, which serves 17 sub-Saharan African destinations,has over the past decade made a particular effort to reach new African and Asian destinations, most recently linking Guinea’s economic hub of Conakry to its Dubai-Dakar service.

The rise in Asian, especially Chinese, investment in Africa has therefore driven passenger traffic on Emirates, via Dubai.

“Dubai has really been able to provide quality of connectivity to the continent of Africa as a natural hub,” says Paul Griffiths, chief executive of Dubai Airports.

“For many years, Emirates has had a healthy share of the market from Europe into Africa.

“Even though that is not logical in terms of distance, it has been very competitive and managed to take market share away from direct services.”

Mr Griffiths says the density of connections on offer from Dubai Airports, which just last month opened its second airport to passenger traffic, is helping to boost air traffic from Africa.

“We can sustain services to remote locations, allowing people to come to Dubai and fan out to 260 destinations,” he says.

“This stimulates economic activity, so Dubai is a catalyst for growth of trade between African nations and the rest of the world.”

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