The Increasing Role of the UAE in Advancing Africa's Logistical Connectivity
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The Increasing Role of the UAE in Advancing Africa's Logistical Connectivity
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By Davis Mwania, Analyst, Botho Emerging Markets Group
September 20, 2022
The UAE is becoming a significant logistics player on the African continent as it leverages its technical capacity to widen its scope of soft power influence. In line with its 5-year plan to expand its partnerships with high-growth African markets, the UAE has established an extensive network of logistics projects across the four regions of the African continent through the global logistics firm DP World ( DPW). To assert itself as a reliable African logistics partner, the UAE should pursue mutual interests alongside key players like China and other stakeholders while ensuring that agreements have clearly defined roles that ensure the effective implementation of projects.
To reinforce its strategic influence in the West African supply chain, DPW acquired a controlling stake in Nigeria-based Africa FMCG Distribution Limited (AFMCG) in July 2022. DPW is also investing $925.7M in a port and an industrial park in Senegal and more than $1B to develop a port and an economic zone close to Dakar in Ndayane.
In February 2022, the firm widened its network coverage to Central Africa when it signed a collaboration agreement to develop a $1.3B deep-sea port in Banana, west DRC. The project, which will take three years to complete, will include the construction of industrial zones and is intended to be UAE’s pathway into Central Africa.
With a yearly capacity of 32,000 containers, the Banana port could be a potential new entry point for international cargo from the Americas, Asia, and Europe into the continent. At the kickoff event for the Banana Port, DRC President Tshisekedi noted that the port will improve the economy through direct and indirect employment, new supply chain opportunities, and higher foreign direct investment (FDI).
Since 2018, DPW has transformed Rwanda’s Kigali logistic hub into a one-stop-shop packaging center, offering bonded and inland container terminal services. DPW’s presence in Kigali has improved access to African interior markets for the UAE and to the UAE and other Gulf countries for Rwandan avocado farmers. In addition, its DUBUY.com platform, present in Kenya, Rwanda, and Tanzania, has helped increase e-commerce in the Eastern region. For instance, in 2021, the online platform facilitated the export of 125,000 tons of coffee and 100,000 tons of tea.
This past March, former Kenyan President Uhuru Kenyatta further expanded the relationship between Kenya and DPW through a concessional deal under a public-private partnership. The partnership will develop, operate, manage, and expand transport logistics services in the ports of Mombasa, Lamu, Naivasha, and Kisumu. Kenya hopes to benefit from DP World’s rich port experience to woo more traders to the Northern Corridor after South Sudan signaled its intention to transfer business from Mombasa ports to Djibouti.
In June 2022, Sudanese Finance Minister, Gibril Ibrahim, revealed that the Abu Dhabi Fund for Development will give $450M to Sudan to construct a 500 km toll road that links an agro-project to an envisioned Red Sea port. This partnership has the potential to facilitate Sudan’s economic and political recovery, given DPW’s increased access to the Horn of Africa. Moreover, with the Red Sea and the Suez Canal key in linking Asia, Africa, and Europe, the heightened investments and attention on the region may win UAE more control in the area.
Through DP World Sokhna, the UAE operates Ain Sokhna port along the Suez Canal Economic Zone in Egypt and has greater access to and control of international markets. DP World owns a 51% stake in the port of Berbera, Somaliland, and invested $440M to build infrastructure that has improved the cargo volumes, vessel productivity, and port waiting time in its five years of operation. The firm also has a 30-year concession to develop the port of Assab in Eritrea.
Further South in Angola, the logistics operator pledged $190M to build a multipurpose terminal. DP World-owned Imperial also acquired a 100% stake in J&J, a Mozambique-based logistics company. The UAE’s growing footprint in the African logistics sector could serve as a key conduit for political and economic influence on the continent. These investments will serve to enhance the UAE's bilateral relations with African countries while positioning it as Africa’s go-to partner for logistics.
However, other players, such as China, have rivaled the Emirati efforts, especially in the Horn of Africa. For instance, DP World’s concession to operate Doraleh, a port at the southern entrance to the Red Sea in Djibouti, has been caught in the throes of a decade-long dispute. In an ongoing case in Hong Kong’s Court of Appeal, DPW and joint venture company, Doraleh Container Terminal, are challenging the decision by the Republic of Djibouti to expel DPW and grant the right to operate Doraleh port to China Merchants Port Holdings. The China-Djibouti-UAE dynamic is indicative of the competing priorities of the external players within the African logistics sector.
Nonetheless, capitalizing on mutual interests would increase the interconnectivity of the logistics industries in Africa and the Gulf. Under the AfCFTA, the UAE, through DP World, taps into a market of 1.3 billion people from 55 countries worth $3.4 trillion. The UAE's major African footprint could assist African countries to execute the agreement as the UAE’s access to African frontier markets can spur better regional and international connectivity. In light of the potential within AfCFTA, the UAE could enter into tripartite agreements with individual countries and other competitors in the sector, such as China.
Such agreements should be structured in a way that enables African countries to take the lead in ensuring that logistical projects have clearly defined roles and that they are not caught up in the mix of competing priorities and interests of internal and external players. Moreover, competing countries could leverage their joint expertise to fast-track projects and ensure speedy and efficient completion. In addition, the UAE can improve its value addition and position itself further as a friend of Africa by facilitating the exchange of skills, technology, and expertise in the continent’s logistics industry.
Davis Mwania is an Analyst at Botho Emerging Markets Group