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The business capitals of Africa have been in Europe for centuries – in London, Paris, Berlin and Lisbon.

Despite decolonization, money still flows from Africa to European financial centers, but over the past decade the corporate headquarters has shifted geographically. Not back to Africa, but to another former British colony: Dubai.

There are now more than 21,000 African companies in Dubai, part of the United Arab Emirates (UAE). According to the Dubai Chamber of Commerce and Industry, that number has increased by more than a quarter since 2017.

The emirate has also attracted 45 multinational corporate headquarters in the Middle East and Africa, compared to just 26 in Africa. This comes from a 2018 report by Infomineo, a data and research outsourcing provider specializing in Africa and the Middle East.

The amount of capital and the number of businesses dealing with Africa began to rise around the same time as the Arab Spring uprisings a decade ago.

“As of 2011, there have been large inflows of Africans into Dubai. The Arab Spring actually helped open Dubai and the United Arab Emirates to greater interest from African countries, ”Theodore Karasik, senior advisor for Gulf State Analytics, a Washington-based consulting firm, told MEE.

The number of tourists from Africa has increased from just 6,954 in 1984 to 600,000 in 2016 and reached 810,000 in 2019, which is 6% of all visitors according to data from Dubai Tourism.

Total trade with Africa also increased from 3% of total trade in Dubai at the turn of the century to 10% in 2018.

According to the Dubai customs, the African continent is the third largest trading region for Dubai after Asia and Europe.

“Years ago the Russians came in, then the Chinese, and when that tapered off we saw Africans with an explosion of wealth going in that direction,” Scott Cairns, managing director of Creation Business Consultants in Dubai, told MEE. “It has slowed down a bit (last year due to the COVID-19 pandemic) but once travel is allowed again we will see Africa re-emerge as it is so close to business to build and commute (from Dubai) for projects. “

A “counter-intuitive” boom

The Gulf city, across the Arabian Peninsula from Africa, did not become a hub for African business on purpose.

“It was not the government of Dubai, but the rulers in Africa who decided to do business in Dubai,” Martin Tronquit, managing partner at Infomineo, told MEE.

Due to its geographical location, the golf city has developed into the business center of the Middle East and Africa (MEA) through laissez-faire policy, infrastructure and air transport networks.

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The boom in MEA firms setting up in Dubai has, in part, helped the emirate successfully wean itself from its dependence on oil revenues. According to the Dubai Chamber of Commerce and Industry, non-oil trade with Africa has grown 700 percent over the past 15 years, rising from $ 33 billion in 2015 to $ 50 billion in 2019.

While six regional headquarters are in the energy sector, eight deal with financial services, seven with automobiles and parts, and five with technology, followed by wholesalers, aerospace and defense, healthcare and transportation, according to Infomineo.

“When we looked at where the Fortune 500 decision makers were, almost half of all MEA headquarters were in Dubai, more than three times the number of Johannesburg, South Africa, which came in second, followed by Nairobi, Kenya ), Casablanca (Morocco) and Lagos (Nigeria) ”, Tronquit quoted data from Infomineo.

“It didn’t feel intuitive as Dubai is technically not in Africa.”

Johannesburg pictured here is well behind Dubai as a destination for companies focusing on the Middle East and Africa (Marco Longari / AFP).

Dubai’s air links, tourist infrastructure and easy access have also helped make the emirate such a hub for African business, Cairns said.

For many of them, flying from Dubai to Africa is easier than flying within Africa, said Isaac Kwaku Fokuo Jr., founder of Botho Emerging Markets Group, a Dubai-based investment advisory firm. And being able to let people travel freely here is a big deal compared to London or New York, where there are several unnecessary barriers like providing bank statements for obtaining a visa just to attend a business meeting. “

“Even within the African continent, some countries such as South Africa, another business center, have strict visa requirements,” he told MEE. “That means visiting can be an annoying experience. In contrast, the hospitality in Dubai signals that Africans from all parts of the continent are welcome. “

Capital by default?

Dubai has been helped, says Infomineo’s Tronquit, by the fact that the African business environment has improved massively over the past 20 years. [they] are not yet at the level of the expectations of global companies – especially in international trade such as double taxation treaties, work visas for expats, corporate law and tariffs. “

Lagos should logically be Africa’s business capital, he added. Nigeria has the largest economy on the continent. (South Africa comes in second.) “However, Lagos has been rated as one of the worst cities in the world to live in and, like Johannesburg, personal safety is a huge concern.”

“It is also difficult to lure top executives and their families to countries where education, health care and safety for most of them do not meet global standards,” Tronquit said, based on the criteria in an Infomineo report.

“It didn’t feel intuitive as Dubai is technically not in Africa.”

– Martin Tronquit, Infomineo

“Dubai is the business capital of Africa by default.”

While “Dubai locals have viewed the emirate as the business capital of Africa for over a decade,” said Karasik of Gulf State Analytics, the nickname doesn’t always sit well with Africans.

“Dubai is a hub that plays a vital role in doing business in Africa, but it would be unfair to say that it is the business capital for an entire continent,” said Fokuo. “Cities like Nairobi, Johannesburg, Cairo and Accra also play an important role as business hubs.”

He moved to Dubai from Nairobi four years ago and has seen a boom in business since then. He has partnered with companies in Saudi Arabia, Kuwait, Bahrain and Egypt to help them expand into Africa. “I joke that there are now more African companies trying to work with us in Dubai than if we were only present in Kenya.”

A one-way street

Trade and business between Africa and the United Arab Emirates is expected to increase as the Emirates seek to strengthen ties with emerging economies. According to UNCTAD, the United Arab Emirates are the second largest investor in Africa after China, investing USD 25.3 billion between 2014 and 2018. The Abu Dhabi Fund for Development, the emirate’s foreign aid agency, was the largest investor with $ 16.6 billion. in 28 African countries according to the Financial Times’ fDI Intelligence.

Other countries in the region are also examining the opportunities. “Africa is a key focus of the Gulf States due to Covid-19 and the need for economic recovery, with a focus on mining and green power projects,” Karasik said. “You compete on the continent.”

Israelis are also striving for business in Africa via Dubai. Consulting firms in the emirate note that contact with Israel has increased since the recently signed Abrahamic Accords, normalization agreements between Israel and several Arab states.

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This renewed interest in Africa is strengthened by the African Continental Free Trade Area (AfCFTA), which came into force in January. It brings together 1.3 billion people from 54 African countries in a US $ 3.4 billion economic bloc.

The UAE has been a strong supporter of the program.

“Since the African markets are very fragmented, consolidated projects (such as the AfCFTA) facilitate integration. Dubai identifies opportunities, ”said Fokuo.

disadvantage

However, one disadvantage of having a branch in Dubai is that companies are far from their target markets.

“There are a lot of ‘Africa’ headquarters in Dubai, but that doesn’t give you any idea of ​​what’s going on there since you’re not in Nairobi or Ghana,” said Fokuo.

With this in mind, the Dubai Chamber of Commerce and Industry has set up four international offices in Africa over the past seven years – in Ethiopia, Ghana, Mozambique and Kenya.

“It would also be great if more events between Dubai and Africa took place in Africa instead of Dubai,” added Fuoko.

Another problem is that Dubai’s growing role as a tax haven is damaging African nations. According to UK-based advocacy group Tax Justice Network, “Dubai is undoubtedly one of the most recognizable secrecy courts in the world based on an increasingly complex set of offshore facilities that include free trade zones, a low tax environment and multiple secrecy and lax enforcement. “Such measures allow the illegal flow of capital from Africa to Dubai.

“I joke that there are now more African companies trying to work with us in Dubai than if we were only present in Kenya.”

– Isaac Kwaku Fokuo Jr., Botho Emerging Markets Group

Lakshmi Kumar, Policy Director for Global Financial Integrity in Washington, DC, told MEE, “The African continent is losing valuable revenue to companies that avoid paying taxable income. This is definitely a problem. “

Kumar noted that Dubai plays a key role as a tax haven as the Dubai International Financial Center has the largest group of financial institutions in the Middle East, Africa and South Asia.

Dubai has also been criticized for its role in the illegal gold trade as “blood gold” was smuggled into the emirate from Africa.

Analysts said Dubai has become an increasingly important hub for gold exports from Africa over the past year, while the emirate’s low tax rate continues to make it attractive to start up businesses, both for African and European companies avoiding higher tax rates.

The city’s real estate market was also seen as an ideal outlet for illicit profits, for example for the Nigerian elite.

“Dubai is a key center for almost every crime, which makes it a bit unique,” said Kumar.