African Infrastructure - Abu Dhabi Throws Hat in the Ring: Despite Africa's Abundance of Natural Resources, the Continent's Productive Capacity Is Hampered by Its Significant Infrastructural Shortcomings. the Chinese Have Vigorously Stepped into This Sector, as They Have in Many Others, but Now an Abu Dhabi-Centred Consortium Has Thrown Down the Gauntlet. Valerie Noury Reports

By Noury, Valerie | African Business, January 2011 | Go to article overview

African Infrastructure - Abu Dhabi Throws Hat in the Ring: Despite Africa's Abundance of Natural Resources, the Continent's Productive Capacity Is Hampered by Its Significant Infrastructural Shortcomings. the Chinese Have Vigorously Stepped into This Sector, as They Have in Many Others, but Now an Abu Dhabi-Centred Consortium Has Thrown Down the Gauntlet. Valerie Noury Reports


Noury, Valerie, African Business


Africa's lack of physical infrastructure is often cited as one of the main reasons the continent has failed to make the advances that other developing nations have. In spite of its enormous mineral and other natural resources, Africa has the lowest productivity of any region in the world. To take an extreme example, the DR Congo is estimated to possess over $24 trillion in mineral resources but it can boast of little more than 1,000 km of decent roads in the entire country - completely inadequate infrastructure given the potential scale of its industry.

It is estimated that between 2008 and 2018, more than $21.7 trillion will be spent on infrastructure in emerging markets, including Africa. This represents a lucrative opportunity for bold and savvy investors with the requisite capital and savoir faire.

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Over the years, the scale and relentless appetite of Chinese investors in Africa has led many to believe that they are unmatchable; that the size of these investments are, and will remain, unique in their scale. Chinese investment has gained a reputation as being especially desirable since it offers a political and economic alternative to the ties accompanying Western countries' investment and the aid of international aid agencies, which are often conditional.

Yet the size of the market and the opportunities inherent in constructing improved African infrastructure continue to attract new players. Whereas infrastructure investments were previously predominantly the domain of the public sector, increasingly they are seen as attractive to private international investors. Countries across the world look for innovative funding approaches - on often improved terms compared to the deals of old.

Marwan Elaraby, MD of Citadel Capital, told a recent conference that despite the challenges, costs and risks involved, such investments are, "good counter-cyclical plays: they tend to be immune to most normal business cycles, their correlation with other assets classes is low, revenues are implicitly linked to inflation, and cash-flows tend to be reasonably stable in many types of infrastructure investments."

A new Abu Dhabi-based commodities company, ADS Holding, has paired with Hutchison Port Holdings (HPH), the world's leading port investor and developer, in a venture that aims to channel multibillion-dollar investments into African infrastructure.

The partnership, Baobab Investments, focuses on Africa and the Middle East, and consists of ADS Holding as its main shareholder with a 40% stake; Grindrod, South Africa's largest shipping company holds a 35% stake and HPH, which has 10%. The World Bank's investment arm, the International Finance Corporation, also holds 15% of Baobab.

ADS Holding is part of the Abu Dhabi Group and has been operating now for nearly 40 years. Its portfolio includes a number of banks, insurance and telecoms companies; the complete holding is valued at some $10bn.

The deep pockets of the state-linked investment company has encouraged it to diversify its investments into often unusual ventures: in 2009, the company acquired a 32% stake in Virgin Galactic, the commercial space venture of British entrepreneur Sir Richard Branson. …

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African Infrastructure - Abu Dhabi Throws Hat in the Ring: Despite Africa's Abundance of Natural Resources, the Continent's Productive Capacity Is Hampered by Its Significant Infrastructural Shortcomings. the Chinese Have Vigorously Stepped into This Sector, as They Have in Many Others, but Now an Abu Dhabi-Centred Consortium Has Thrown Down the Gauntlet. Valerie Noury Reports
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