(MENAFN- SomTribune) CDC Group to invest $720m for minority stake in project in Egypt, Senegal and Somaliland
The UK government's development investment arm is to make the single-biggest investment in its 73-year history by taking a minority stake in three African ports in a $1.7bn joint venture with DP World, the Dubai-based ports operator.
CDC Group is announcing on Tuesday that it is to invest an initial $320m in the expansion of ports in Egypt, Senegal and the self-declared east African state of Somaliland. It also intends to funnel a further $400m into DP World ports and logistics operations, including dry ports, it said.
DP World, which has been expanding rapidly in Africa, will invest an initial $1bn. Tenbite Ermias, head of Africa at CDC, said the deal had been four years in the making.“It is a visible commitment to growing Africa's ability to trade in both directions, to reduce costs and to simplify exports,” he said.“We have a shared vision with DP World — to open up as many ports across the continent as possible. Our investment allows them to stretch their dollar further, to do more.”
Ermias estimated that the expansion of the three ports — Dakar in Senegal, Sokhna on Egypt's Red Sea coast and Berbera in Somaliland — would create nearly 140,000 direct jobs in the three countries and add more than $50bn to total trade by 2035.
The expansion of Berbera, former capital of the protectorate of British Somaliland, would increase Somaliland's gross domestic product by an estimated 6 per cent, he said, as well as providing an alternative to using Djibouti for landlocked Ethiopia. The investment in Dakar, he added, would not only help Senegal but also provide an export route for landlocked Sahelian countries such as Mali.
“This is not geopolitics,” Ermias said of the instability in the Horn of Africa and the possible perception that UK aid was helping Ethiopia, whose government is embroiled in a brutal civil war in Tigray province.“We make investments in risky places; this is our mandate.”
As the UK aid budget comes under pressure, CDC's investment marks what has been a gradual shift of UK development funds into so-called impact investments that also bring a commercial return. CDC, which has a portfolio of $7.1bn, reinvests profits from its investments into new projects and describes itself as“largely self-funding”, although its capital is supplemented by the UK government each year.
CDC received £650m from the UK government in 2020. Over past 10 years it has received about 3 per cent of Britain's overseas development budget.
Paul Collier, professor of economics and public policy at Oxford university's Blavatnik School of Government, said that international development finance institutions like CDC should work more closely together to invest in fragile states where private investment was lacking.
“The future of aid is to ignite the private sector,” he said.“Countries will stay poor for ever unless their private sectors grow.”
Many African leaders have emphasised that they see trade and investment, and not aid, as their path to development. Nana Akufo-Addo, Ghana's president, has spoken of pushing his nation“beyond aid” by transforming raw materials inside the country rather than exporting them in unprocessed form.
Sultan Ahmed bin Sulayem, chair and chief executive of DP World, said:“This partnership with CDC . . . will enable us to increase our investments in ports and logistics infrastructure across Africa . . . and create transformational opportunities for millions of people.”
Nick O'Donohoe, CDC's chief executive, said Africa's ability to trade was being hampered by logistical bottlenecks, which were in turn adding to social fragility.“Stable and flourishing economies are built on reliable access to global and intra-continental trade,” he said.
Previous large CDC investments have been in digital infrastructure and energy projects and, most recently, in a consortium participating in Ethiopia's telecoms privatisation. Those investments were all intended to catalyse economic growth and create jobs, it said.
By David Pilling
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